As filed with the Securities and Exchange Commission on January 13, 2012

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of
1933

Audience, Inc.

(Exact name
of Registrant as specified in its charter)

Delaware

3674

91-2061537

(State or other jurisdiction ofincorporation or organization)

(Primary Standard IndustrialClassification Code Number)

(I.R.S. Employer

Identification Number)

440 Clyde Avenue

Mountain View, CA 94043

(650) 254-2800

(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)

Peter B. Santos

President and Chief Executive Officer

Audience, Inc.

440 Clyde Avenue

Mountain View, CA 94043

(650) 254-2800

(Address,
including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael J. Danaher, Esq.

Julia Reigel, Esq.

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650
Page Mill Road

Palo Alto, California 94304

(650) 493-9300

Patrick A. Pohlen, Esq.

Andrew S. Williamson, Esq.

Latham & Watkins LLP

140 Scott Drive

Menlo Park,
California 94025

(650) 328-4600

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check
the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

Smaller reporting company ¨

(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities

to be Registered

Proposed Maximum

Aggregate Offering Price(1)

Amount of

Registration Fee

Common Stock, par value $0.001 per share

$75,000,000

$8,595

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes offering price of
shares that the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.

The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities and it is not soliciting an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.

Subject to
completion, dated January 13, 2012

Prospectus

shares

Common stock

This is the initial public offering of common stock of Audience, Inc. We are offering
shares of common stock. The estimated initial public offering price is between and per share.

We expect to apply to list our common stock on either The NASDAQ Global Market or the New York Stock Exchange under the symbol ADNC.

Per share

Total

Initial public offering price

$

$

Underwriting discounts and commissions

$

$

Proceeds to Audience, Inc., before expenses

$

$

We have granted the underwriters an option for a period of 30 days to purchase up to
additional shares of common stock.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on or about ,
2012.

You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you.
Neither we nor the underwriters have authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of
this document.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession
or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.

Through and including
, 2012 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your
investment decision. You should read this summary together with the more detailed information, including our financial statements and the related notes, elsewhere in this prospectus. You should also carefully consider the matters discussed in
Risk factors beginning on page 10. Unless the context otherwise requires, we use the terms Audience, we, us and our in this prospectus to refer to Audience, Inc.

Business overview

We are the leading provider of
intelligent voice and audio solutions that improve voice quality and the user experience in mobile devices. We collaborate with leading auditory neuroscientists to understand the human auditory system and have developed purpose-built processors that
combine science and technology to function like human hearing. Our low power, hardware-accelerated digital signal processors (DSPs) and associated algorithms substantially improve sound quality and suppress noise in mobile devices. As the primary
driver of the mobile device market, the mobile phone continues to play an increasingly prominent role in peoples lives. Voice communication is a primary function of mobile phones, and we expect voice to increasingly complement touch as a core
user interface, heightening the importance of voice and audio quality in mobile devices.

The human auditory system is remarkable for its ability to
isolate individual sources within a complex sound mixture. We have incorporated this capability into an intelligent platform by employing computational auditory scene analysis (CASA), a scientific discipline dedicated to mapping the sound separation
functions in human hearing, into a computational framework. This approach enables our products to intelligently characterize, group and isolate sounds to improve sound quality while suppressing noise. We believe that our approach addresses the
challenge of providing clear and consistent voice and audio quality more effectively than other available solutions. We also believe that our highly scalable platform will enable us to create and drive differentiated user experiences, such as robust
speech recognition and high-quality audio for mobile video communication.

Our platform consists of our proprietary, purpose-built DSPs, analog and mixed
signal circuits and algorithms for voice isolation and noise suppression. We also provide our proprietary AuViD graphical design tools to help original equipment manufacturers (OEMs) design in and tune our products in their efforts to bring mobile
devices with the best voice and audio quality to market rapidly. Our technologies and tools are underpinned by our significant intellectual property, resulting in a strong foundation from which to extend the value of our platform through continued
innovation and integration of adjacent voice and audio functionality.

We were founded in 2000 and initially targeted the rapidly growing mobile device
market, including mobile phones, media tablets and mobile PCs. We began production shipments in 2008 and, as of December 31, 2011, had sold over 135 million processors to our OEM customers. In addition to the mobile device market, we
believe that our voice and audio technology is applicable to a broad range of other market segments, including automobile infotainment systems, digital cameras, digital televisions, headsets and set top boxes. We outsource the manufacture of our
voice and audio processors to independent foundries and use third parties for assembly, packaging, test and logistics. We had total revenue of $2.5 million, $5.7 million, $47.9 million and $79.7 million for 2008, 2009, 2010 and
the nine

months ended September 30, 2011, respectively. We had net income (loss) of $(14.5) million, $(16.8) million, $4.8 million and $13.9 million for 2008, 2009, 2010 and the
nine months ended September 30, 2011, respectively.

Industry overview

Mobile devices are ubiquitous today and play an increasingly prominent role in peoples lives. However, due to network and device limitations, voice quality has not improved significantly since the
introduction of mobile phones. For example, the sound frequency range used by mobile devices has historically been constrained by narrowband, circuit switched networks, resulting in lower voice quality than in a face-to-face conversation. Mobile
devices have historically been unable to adequately separate the users voice from background noise. As a result, users have had to tolerate noisy, poor quality voice communication. After years of mobile network infrastructure investments in
bandwidth and connectivity, mobile network operators (MNOs) are turning their attention to voice and audio quality as a way to improve user experience, satisfaction and loyalty.

The transition from narrowband to wideband communications has produced networks capable of carrying higher quality signals, and the sound quality delivered by these networks is poised for significant improvement.
Advanced voice and audio solutions will also enable mobile devices to improve sound quality and enhance the user experience. As users increasingly become aware of these network and device improvements, they are demanding improved voice quality in
the devices they depend upon, including smartphones, feature phones, media tablets and laptops. In addition, new applications and functionality, such as voice as a user interface, will require improved voice and audio quality. We expect that OEMs
and MNOs will increasingly adopt advanced voice and audio solutions as they seek to differentiate future products and services.

IDC, an independent
market research firm, estimates that the market for mobile devices, including smartphones, feature phones, media tablets and mobile PCs, will grow to 2.6 billion units by 2015. This market is undergoing rapid change, and IDC expects fast
growing market segments such as smartphones and media tablets to have 2010 to 2015 unit compound annual growth rates (CAGRs) of 28% and 50%, respectively, driving growth and changing user expectations for mobile devices. Dedicated voice and audio
processors are expected to expand rapidly as a new category not only in mobile devices, but also in market segments such as automobile infotainment systems, desktop PCs, digital cameras, digital televisions, headsets and set top boxes. IDC estimates
that voice and audio processor unit sales will grow from 63 million units in 2010 to over 1.6 billion units in 2015, representing a CAGR of 92%.

A variety of trends are driving demand for high-quality voice and audio solutions in mobile devices, including:



users expect more freedom in how and where they communicate;



users expect high-quality voice and audio in their mobile devices;



voice is becoming a preferred interface for mobile device applications;



users increasingly rely on their mobile devices for far-field interaction, where the mobile device is held remotely from the user, such as in speakerphone mode
or video conferencing;

users perception of the HD video experience is impacted by poor quality audio;



OEMs continue to expand functionality in mobile devices; and



MNOs are deploying wideband communications networks.

There are significant challenges in delivering high-quality voice and audio solutions in mobile devices, including:



mobile devices are used in noisy environments;



separation of voice from noise while preserving speech quality is very difficult;



a complete voice and audio solution cannot be provided without consistent voice isolation;



the size, cost and power constraints of mobile devices impose significant limitations on acoustics and signal processing; and



traditional voice and audio signal processing techniques are not scalable or adaptable to dynamic sound environments.

Our solution

We provide intelligent voice and audio
solutions that substantially improve sound quality and suppress noise in mobile devices. We believe that our approach addresses the challenge of providing clear and consistent voice and audio quality more effectively than other available solutions.
Our platform consists of our proprietary, purpose-built DSPs, analog and mixed signal circuits and algorithms for voice isolation and noise suppression.

Clarity of audio
capture and playback. We believe that demand for creating and viewing user-generated content will lead users to select devices that feature differentiated high definition (HD) audio and video capture.

Benefits to the mobile device ecosystem

Original
equipment manufacturers. OEMs can more effectively differentiate their mobile devices by providing a better user experience when our intelligent voice and audio solutions are incorporated into their products.

Mobile operating system providers. Mobile operating system providers benefit from our
processors ability to intelligently analyze and understand the sound environment in support of speech recognition, multimedia and other applications.

Our competitive strengths

We believe that we are the leader in developing, integrating and delivering voice
and audio solutions as a result of the following core strengths:

Deep domain expertise in voice and audio
communications. Our team includes leading innovators in CASA, speech analysis and coding, spatial audio and acoustics, among other disciplines.

Differentiated, scalable technology platform. Our proprietary platform offers high-quality voice and audio performance at low power by leveraging our purpose-built DSPs and algorithms.
Our CASA-based architecture is scalable with compute power and across new applications and use cases.

Strong relationships with industry-leading MNOs
and operating system developers. Our collaboration with leading MNOs provides us visibility into critical design specifications and development timelines, which helps to keep us at the forefront of technological innovation
in voice and audio solutions. We are actively engaged with leading MNOs, including AT&T Inc. (AT&T), China Mobile Limited (China Mobile), Orange plc (Orange), Sprint Nextel Corporation (Sprint Nextel), Telecom Italia SpA (Telecom Italia),
Deutsche Telekom (T-Mobile), Verizon Wireless (Verizon) and Vodafone Group plc (Vodafone).

Collaboration and repeat design wins with leading
OEMs. Through close, long-term relationships with OEMs, we gain both a unique understanding of their product roadmaps and an ability to influence design decisions. As of December 31, 2011, our processors had been
incorporated in over 60 mobile device models that have reached commercial production, including those sold by leading OEMs, such as Apple Inc. (Apple) through its contract manufacturers (CMs), HTC Corporation (HTC), LG Electronics Inc. (LG), Pantech
Corporation, Ltd. (Pantech), Samsung Electronics Co., Ltd. (Samsung), Sharp Corporation (Sharp) and Sony Corporation (Sony).

Significant OEM design
support capabilities. We work closely with OEMs throughout their design processes, using our proprietary AuViD graphical design tools to integrate our solutions into their mobile devices, which enables us to improve design
efficiency, increase productivity and establish differentiated design relationships with OEMs.

Significant intellectual property portfolio in voice
and audio technologies. Our intellectual property consists of core technology related to mapping the human auditory system within a computational framework, as well as the technology, tools and methods related to the
implementation of these technologies in mobile devices.

We are subject to a number of risks which you
should be aware of before you buy our common stock, including the following:



we are substantially dependent on a single OEM and its CMs for our revenue and our relationship with this OEM is undergoing a significant transition from the
sale of voice and audio processors to the license of our semiconductor intellectual property (processor IP), which may have a material and negative effect on our business, financial condition, operating results and cash flows;



we depend on a small number of OEMs for a substantial portion of our revenue and the loss of, or a significant reduction in orders from, one or more of our OEMs
could adversely affect our revenue and significantly harm our business, financial condition, operating results and cash flows;



if we are unable to diversify our revenue by maintaining or extending our relationships with our current OEMs or establishing new OEM relationships, our growth
may be limited, and our business, financial condition, operating results and cash flows could be adversely affected;



we have a history of losses, and we may not be able to sustain profitability in the future;



our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control, and you should not rely on our
quarterly comparisons as an indicator of future performance;



the market for mobile device components is highly competitive and includes larger companies with significantly greater resources than we have. If we are unable
to compete effectively, we may experience decreased sales or increased pricing pressure, which would adversely impact our business, financial condition, operating results and cash flows;



if the market for mobile devices with improved sound quality and the demand for our products do not continue to grow as we expect, our business, financial
condition, operating results and cash flows could be materially and adversely affected; and



if the average selling prices of our products decrease, our revenue and gross margins could decline.

We were founded in July 2000 in California under the name Applied Neurosystems Corporation and we changed our name to Audience, Inc. in June 2002. In June 2011, we reincorporated as a Delaware corporation under the
name Audience, Inc. Our principal executive offices are located at 440 Clyde Avenue, Mountain View, California 94043. Our telephone number is (650) 254-2800. Our website address is www.audience.com. Information contained on, or that can be
accessed through, our website is not incorporated by reference into this prospectus.

AUDIENCE, earSmart, hear and be
heard, Fast Cochlea Transform, the worlds most intelligent voice processor, our logo and other trademarks or service marks of Audience appearing in this prospectus are the property of Audience, Inc. This
prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies trade names, trademarks or service marks to imply a relationship with, endorsement of, or
sponsorship of us by, these other companies.

We intend to use the net proceeds from this offering for working capital and other general corporate purposes including research and development and the expansion of our product lines to penetrate new
market segments where voice and audio quality impacts the user experience. We may also use part of the net proceeds to develop technology partnerships and to acquire other businesses, products or technologies. However, we do not have any agreements
or commitments for any specific acquisition at this time. Our management will have broad discretion to use the net proceeds from this offering.

Proposed symbol

ADNC

The number of shares of our common stock to be outstanding following this offering is
based on 426,341,948 shares of our common stock outstanding as of September 30, 2011, which excludes:



115,087,213 shares of common stock issuable upon exercise of options outstanding as of September 30, 2011 at a weighted average exercise price of $0.09 per
share;



23,933,812 shares of common stock reserved for future issuance under our 2011 Equity Incentive Plan (2011 Plan) as of September 30, 2011;



13,552,941 shares of common stock reserved for future issuance under our 2011 Employee Stock Purchase Plan (2011 ESPP, and with our 2001 Stock Plan and 2011
Plan, collectively, Stock Plans), which will become effective on the effective date of the registration statement of which this prospectus is a part; and



3,348,147 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of September 30, 2011, at a weighted average exercise
price of $0.1209 per share.

Unless otherwise indicated, this prospectus reflects and assumes the following:



the automatic conversion of each outstanding share of our preferred stock into one share of common stock upon the closing of the offering;



the completion of a
for reverse split of our outstanding common and preferred stock;



the filing of our restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the closing of this offering;
and

We derived our summary consolidated statements of operations data for 2008, 2009 and 2010 from our audited consolidated financial statements and related notes
included elsewhere in this prospectus. Our summary consolidated statements of operations data for the nine months ended September 30, 2010 and 2011 and our summary consolidated balance sheet data as of September 30, 2011 were derived from
our unaudited consolidated financial statements included elsewhere in this prospectus. Our unaudited consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include, in our opinion, all
adjustments, which included only normal recurring adjustments, that we consider necessary for the fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of future results. The
summary of our financial data set forth below should be read together with our consolidated financial statements and the accompanying notes to our consolidated financial statements, as well as Selected consolidated financial data and
Managements discussion and analysis of financial condition and results of operations appearing elsewhere in this prospectus.

Year ended December 31,

Nine months endedSeptember 30,

2008

2009

2010

2010

2011

(unaudited)

(in thousands, except share and per share data)

Consolidated statements of operations data:

Revenue

$

2,454

$

5,749

$

47,920

$

28,165

$

79,716

Cost of revenue(1)

1,729

5,355

19,314

12,061

35,745

Gross profit

725

394

28,606

16,104

43,971

Operating expenses:

Research and development(1)

9,147

8,969

11,445

8,266

14,605

Selling, general and administrative(1)

6,651

8,058

12,217

8,195

14,870

Total operating expenses

15,798

17,027

23,662

16,461

29,475

Income (loss) from operations

(15,073

)

(16,633

)

4,944

(357

)

14,496

Interest income (expense), net

218

11

(17

)

(17

)

(5

)

Other income (expense), net

367

(136

)

(139

)

12

(557

)

Net income (loss)

$

(14,488

)

$

(16,758

)

$

4,788

$

(362

)

$

13,934

Net income (loss) per share attributable to common stockholders(2):

Basic

$

(1.04

)

$

(1.08

)

$



$

(0.02

)

$

0.02

Diluted

$

(1.04

)

$

(1.08

)

$



$

(0.02

)

$

0.02

Weighted average shares used in computing net income (loss) per share attributable to common stockholders(2):

Basic

13,936,404

15,489,478

18,589,862

17,269,042

27,742,340

Diluted

13,936,404

15,489,478

18,589,862

17,269,042

95,868,291

Pro forma net income per share attributable to common stockholders (unaudited)(2):

Basic

$

0.01

$

0.03

Diluted

$

0.01

$

0.03

Weighted average shares used in computing pro forma net income per share attributable to common stockholders
(unaudited)(2):

See Note 6 to our consolidated financial statements for an explanation of how we arrived at our basic and diluted net income (loss) per share attributable to common
stockholders and pro forma net income per share.

(3)

The pro forma balance sheet data in the table above gives effect to the automatic conversion of all shares of our outstanding convertible preferred stock into shares of common
stock upon the closing of this offering on a one for one basis. In addition, it assumes the reclassification of the convertible preferred stock warrant liability to additional paid-in capital.

(4)

The pro forma as adjusted balance sheet data in the table above gives effect to our receipt of the estimated net proceeds from this offering at an assumed initial public offering
price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and
commissions and estimated offering expenses that we must pay.

(5)

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the
midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders equity (deficit) by
$ , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses that we must pay.

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all the other information contained in this prospectus,
including our financial statements and the related notes, before deciding whether to invest.

Risks related to our business and industry

We are substantially dependent on a single OEM and its CMs, for our revenue and our relationship with this OEM is undergoing a significant
transition from the sale of voice and audio processors to the license of our processor IP, which may have a material and negative effect on our business, financial condition, operating results and cash flows.

We sell our products to Foxconn International Holdings, Ltd. and its affiliates (collectively, Foxconn) and Protek (Shanghai) Limited and its affiliates
(collectively, Protek), each a major CM that produces mobile phones containing our processors almost exclusively for Apple. In 2010 and the nine months ended September 30, 2011, Foxconn and Protek collectively accounted for 82% and 79% of our
total revenue, respectively. We entered into an agreement with Apple in 2008, which governs our relationship and under which we sell custom processors to Foxconn and Protek and license our processor IP to this OEM for other mobile phones.
Historically, we have sold Foxconn and Protek our processors on a purchase order basis. We anticipate that Foxconn and Protek will continue to purchase our processors for multiple mobile phone models that they produce but cannot assure you that they
will continue to do so in similar volumes, or at all.

Commencing in the three months ended December 31, 2011, Apple has integrated our processor IP in
certain of its mobile phones. Pursuant to our agreement, this OEM will pay us a royalty, on a quarterly basis, for the use of our processor IP for all mobile phones in which it is used. We have granted a similar license to this OEM for a new
generation of processor IP; however, this OEM is not obligated to incorporate our processor IP into any of its current or future mobile devices. For the new generation processor IP, the royalty this OEM is required to pay us is subject to a
quarterly maximum, after which we would not receive royalties for shipments of devices into which our processor IP has been integrated. Under our agreement with this OEM, we have entered into statements of work to set forth terms and conditions
specific to licensing processor IP. Pursuant to both the agreement and statements of work, this OEM may cancel a statement of work for a new custom processor upon 30 days prior written notice to us. This OEM has no obligation to, and we do not
know the extent to which the OEM will continue to, license our processor IP for integration into mobile devices it produces.

The per unit royalty that
we are entitled to receive for the use of our processor IP is lower than the price we receive for our stand-alone processors. We expect our total revenue from Foxconn and Protek to decline over time as the mix of revenue shifts from processor sales
to royalties. If sales to other OEMs do not increase sufficiently to offset the decline, our total revenue may also decline. Our future royalties may also be at risk with respect to future mobile device releases if the OEM to which we have licensed
our processor IP exerts pricing pressure on us, expends resources to develop an internal solution or considers a solution that is incorporated in other audio components such as a baseband processor.

Our revenue from this OEM and its CMs may be difficult to predict as it is dependent upon sales of the OEMs new mobile devices, over which we have no control.
On a period to period basis, our revenue from this OEM and its CMs may also fluctuate as we are substantially dependent upon the timing of design cycles and product introductions. We anticipate that our revenue from this OEM and its CMs

may temporarily decline as users defer purchases in anticipation of new product launches, increase in the quarter in which a new version of a mobile device is launched and subsequently decline
over the course of the products lifecycle.

Our royalty revenue will lag the sales of mobile phones that integrate our processor IP by one quarter.
We have limited rights to audit the shipment data we receive, which limits our ability to verify calculated royalty revenue or seek redress for reports we believe are not accurate, and we have no experience in testing and evaluating the accuracy of
such data from this OEM.

We depend on a small number of OEMs for a substantial portion of our revenue and the loss of, or a significant reduction
in orders from, one or more of our OEMs could adversely affect our revenue and significantly harm our business, financial condition, operating results and cash flows.

We sell our voice and audio processors to OEMs and license our processor IP to a single OEM. In 2010 and the nine months ended September 30, 2011, Foxconn and Protek collectively accounted for 82% and 79% of
our total revenue, respectively, and Samsung accounted for 7% and 17% of our total revenue, respectively. Although we are reliant on a small number of OEMs for our revenue in any period, the identity of those OEMs may change depending on the timing
of their mobile device releases, seasonal user purchasing patterns and launch dates set by MNOs. We expect our operating results for the foreseeable future to depend on sales to a small number of OEMs and on the ability of these OEMs to sell mobile
devices that incorporate our processors. Our revenue may fluctuate from quarter to quarter as our sales are dependent upon the timing of OEMs design cycles and product introductions. Substantially all of our sales to date have been made on a
purchase order basis, which permits our OEMs to cancel, change or delay product purchase commitments with little or no notice to us and may make our revenue volatile from period to period. Our OEMs are generally not obligated to purchase from us and
may purchase voice and audio solutions from our competitors.

We typically work with OEMs to obtain design wins prior to the OEM entering into an
agreement with an MNO to produce a given mobile device. However, even if the design win is awarded, the OEM or MNO may cancel a given mobile device launch. Although it would be time consuming for an OEM to design our products out of mobile devices
currently in production, an OEM may seek to do so or to establish a second source. We do not have agreements with our OEMs requiring them to incorporate our processors in future mobile devices. Our OEMs are not obligated to complete the development
or begin commercial shipment of any mobile phones or media tablets that incorporate our processors.

These OEMs or their CMs may purchase fewer of our
processors than they did in the past, alter their purchasing patterns, modify the terms on which they purchase our products or decide not to purchase our products at all. Decreased purchases by our major OEMs, whether for current or future mobile
device models in which our products were included or otherwise, changes in their purchasing patterns, modification of terms or a disruption or termination of our relationships with our major OEMs could adversely affect our revenue and significantly
harm our business, financial condition, operating results and cash flows. This type of loss could also cause significant fluctuations in our results of operations because we have significant fixed expenses in the short term and our sales and
development cycle to obtain new design wins and new OEMs is long.

If we are unable to diversify our revenue by maintaining or extending our
relationships with our current OEMs or establishing new OEM relationships, our growth may be limited, and our business, financial condition, operating results and cash flows could be adversely affected.

We have historically derived a substantial majority of our revenue from sales to a small number of OEMs. We may be unable to secure future design wins from these
OEMs as they develop and

introduce new products and, even if we do, existing OEM product sales may decline and new mobile devices introduced by our current OEMs may not achieve market acceptance. We cannot assure you
that we will be able to sustain our revenue from our existing OEMs. Our OEMs typically buy our processors on a purchase order basis and do not enter into long-term contracts or minimum purchase commitments that would obligate them to continue to buy
additional processors from us in the future. Although we seek to grow our OEM base through new design wins, our sales and development cycle to obtain initial design wins from new OEMs is long and subject to uncertainties and we cannot assure you
that we will be successful in doing so. Even if we are successful in obtaining design wins with new OEMs, our existing OEM customers may continue to account for a substantial portion of our sales in the future. If we are unable to generate repeat
business from our existing OEMs, generate revenue from new OEMs or expand into broader markets, our operating results would be adversely affected.

We have a history of losses, and we may not be able to sustain profitability in the future.

Since our formation, we have recorded a net loss in every period other than 2010 and the nine months ended September 30, 2011. We had net losses of $14.5 million in 2008 and $16.8 million in 2009. As
of September 30, 2011, our accumulated deficit was $36.5 million. We anticipate continuing to spend significantly to develop new processors and expand our business, including expenditures for additional personnel in sales and marketing and
research and development. As a public company, we will also incur significant legal, accounting and other expenses as a result of regulatory requirements that did not apply to us as a private company. We may encounter unforeseen difficulties,
complications and delays and other unknown factors that require additional expenditures. Due to these increased expenditures, we will have to generate and sustain higher revenue in order to maintain and sustain profitability. Our rate of revenue
growth since the first quarter of 2010 may not be sustainable and we may not generate revenue in excess of our anticipated additional expenditures to maintain profitability. Our expense levels are based in part on our expectations as to future sales
and a significant percentage of our expenses are fixed in the short term. If sales are below expectations, our operating expenses would be disproportionately high relative to revenue, which would adversely impact our profitability. Although we
achieved profitability during 2010 and the nine months ended September 30, 2011, we may not be able to sustain profitability in the future. Failure to sustain profitability may require us to raise additional capital, which may not be available
on terms acceptable to us, or at all.

Our operating results may fluctuate significantly as a result of a variety of factors, many of which are
outside of our control, and you should not rely on our quarterly comparisons as an indicator of future performance.

Our operating results may
fluctuate due to a variety of factors, many of which are outside of our control. Our sales cycles are long and unpredictable and our sales efforts require substantial time and expense. Our revenue is difficult to predict and may vary substantially
from quarter to quarter, which may cause our operating results to fluctuate significantly. We ship a significant portion of our processors in the same quarter in which they are ordered such that small delays in receipt of purchase orders and
shipment of products could result in our failure to achieve our internal forecasts or stock market expectations. In any quarter, our revenue may be largely attributable to the timing of our OEMs orders. Our OEMs often increase purchases of our
processors as part of product launches and the timing of those product launches may cause the timing of our orders with our OEMs to fluctuate. Our revenue depends on the ability of OEMs to sell mobile devices that incorporate our processors. In
addition, we expect our gross margins to fluctuate over time depending on the mix of more recently introduced, higher margin products and older products that are subject to declining margins, as well as the mix between sales of processors and
license of our processor IP. For these reasons, comparisons of our operating results on a period to period basis may not be meaningful. You should not rely on our

past results as an indication of our future performance. If our revenue or operating results fall below the expectations of investors or the securities analysts that follow us, the price of our
common stock may decline.

Other factors that are difficult to predict and that may affect our operating results include:



the timing and magnitude of shipments of our processors and the sale of mobile devices that have integrated our processor IP in each quarter;



the extent to which and the timing of when our OEMs launch new mobile devices incorporating our voice and audio processors;



deferral of purchases of existing mobile devices in anticipation of new devices from our OEMs;



the introduction of new mobile device operating systems or upgrades and their impact on sales of existing mobile devices;



the timing of product introductions or upgrades or announcements by us or our competitors;



the gain or loss of one or more design wins with one or more significant OEMs;



fluctuations in demand and prices for our voice and audio processors;



increases in the cost to manufacture, assemble and test our processors;



OEMs overbuilding inventories of mobile devices and reducing purchases of our solutions as they use their excess inventory;



efforts to reduce the cost and/or the bill of materials of OEMs mobile devices and the impact on our pricing;



our ability to anticipate changing demands and develop new technologies, products and improvements that meet OEM and MNO requirements on a timely basis;



production delays as a result of manufacturing capacity or quality issues;

any change in the competitive landscape of our industry, including consolidation or the emergence of new competitors;



general economic conditions in the markets in which we operate; and



other factors outside of our control.

For
these reasons, comparisons of our operating results on a period to period basis may not be meaningful. You should not rely on our past results as an indication of our future performance.

The market for mobile device components is highly competitive and includes larger companies with significantly greater resources than we have. If we are unable to compete effectively, we may experience
decreased sales or increased pricing pressure, which would adversely impact our business, financial condition, operating results and cash flows.

The market for mobile device components is highly competitive and we expect competition to intensify in the future. There are a number of components in the voice
and audio subsystem of a mobile device

including baseband processors, audio codecs and voice and audio processors. Currently, we only provide voice and audio processors and do not compete in other aspects of the mobile device
component market. In the future, we may elect to expand our offerings to include other subsystem components and we would need to compete against companies offering those subsystem components. Companies that currently compete for sales of other
mobile device components may enter the voice and audio processor market with stand-alone components or components with other functionalities and compete with us.

We currently face competition from a number of established companies that produce components for the mobile device audio subsystem, including companies that produce dedicated voice and audio solutions, such as
Maxim Integrated Products, Inc. (Maxim), ON Semiconductor Corporation (ON Semiconductor), Qualcomm Incorporated (Qualcomm), Texas Instruments Incorporated (Texas Instruments), Wolfson Microelectronics plc (Wolfson) and Yamaha Corporation (Yamaha).
We also face competition from smaller, privately held companies and could face competition from new market entrants, whether from new ventures or from established companies moving into the areas of voice and audio subsystems that our products
address. We also compete against solutions internally developed by OEMs, as well as combined third-party software and hardware systems.

Each of our well
established current and potential competitors have longer operating histories, greater brand awareness, a more diversified OEM base, a longer history of selling voice and audio subsystem components to OEMs and significantly greater financial,
technical, sales, marketing and other resources than we have. As a result of their established presence in the industry, some of our competitors have substantial control and influence over future trends in the industry, including acceptance of a
particular industry standard or competing technology. Many of our competitors benefit from long-standing relationships selling voice and audio subsystem components to key decision makers at many of our current and prospective OEMs. Our competitors
may be able to leverage these existing OEM relationships to persuade our current and potential OEMs to purchase our competitors products, regardless of the performance or features of our processors. Our competitors may also be able to devote
greater resources to the development, promotion and sale of products, which could allow them to introduce new technologies and products to the market faster than we can. In addition, the lack of widely accepted objective measures and testing
standards for sound quality may make it difficult for OEMs and MNOs to assess the benefits of our solutions or differentiate our solutions from those of our competitors.

Because many of our competitors have greater resources than we have and are able to offer a more diversified and comprehensive bundle of products and services, these competitors may be able to adopt more aggressive
pricing policies than we can, through which they could deliver competitive products or technologies at a lower price than our processors. Due to the larger production and sales volumes enjoyed by our larger competitors across multiple product
families, our competitors may be able to negotiate price reductions, production dates and other concessions from their suppliers that we cannot. If our competitors are able to undercut our prices, we may be unable to remain competitive in the
industry and lose sales or be forced to reduce our selling prices. This could result in reduced gross margins, increased sales and marketing expenses or our failure to increase or maintain market segment share, any of which could seriously harm our
business, financial condition, operating results and cash flows.

Our ability to compete effectively depends on a number of factors, including:



our processors scalability, performance, quality, ease of use and cost effectiveness relative to those of our competitors products;

our products interoperability with various data access protocols and other voice and audio subsystem components of mobile devices;



our ability to continue to establish greater name recognition and build upon our reputation in the industry;



our ability to respond effectively to aggressive business tactics by our competitors, including selling at lower prices or asserting intellectual property
rights, irrespective of the validity of the claims; and



our ability to protect our intellectual property.

If the market for mobile devices with improved sound quality and the demand for our products do not continue to grow as we expect, our business, financial condition, operating results and cash flows could be
materially and adversely affected.

Our processors are designed to address the sound quality challenges faced by users with their mobile devices.
OEMs and MNOs may decide that the costs of improving sound quality outweigh the benefits, which could limit demand for our solutions. Users may also be satisfied with existing sound quality or blame poor quality on their MNOs networks. The
market for our products is evolving rapidly and is technologically challenging, and our future financial performance will depend in large part on growth of this market and our ability to adapt to user, OEM and MNO demands. Our current products are
solely focused on improving the sound quality of mobile devices. Consequently, we are vulnerable to fluctuations in or the absence of demand for products that improve sound quality. A number of factors could adversely affect the growth in the market
or the demand for our products, including the following:



introduction of new mobile devices with different components or software that provide the same function as our products;



internally developed solutions that reduce the demand for our products;



improved wireless network technology that performs similar functions to those currently performed by our solutions;



lack of user acceptance of sound quality improvements that we may develop or our inability to timely develop product enhancements that satisfy user requirements;

OEM design constraints for sound quality solutions and tradeoffs they face in the design process.

If the average selling prices of our products decrease, our revenue and gross margins could decline.

Consistent with trends in the semiconductor industry, we have reduced the price of our products in the past and may do so in the future. Because of the resources
available to and the broader product portfolios of many of our large, established competitors, erosion in average selling prices throughout

our industry could have a larger impact on our business than on these large competitors. We may also elect to sell lower priced products to address the requirements of mobile devices with lower
price points, which could cause our average selling prices, revenue and gross margins to decline. Our average selling prices and gross margins may vary substantially from period to period as a result of the mix of products we sell during any given
period and the relative proportion of royalty revenue. As a result, our revenue and gross margin results in any period may fall short of investors and securities analysts expectations and our stock price may decline.

If the average selling prices for our existing products decline without offsetting cost reductions and we are unable to introduce and develop significant demand for
higher margin processors, we may be unable to maintain our gross margins.

If we are unsuccessful in developing, selling or licensing new products
that achieve market acceptance, our ability to attract and retain OEMs could be impaired, our competitive position could be harmed and our revenue could be reduced.

We compete in a market characterized by rapid technological change, frequent new product introductions, changing OEM needs, evolving MNO requirements and increasing user demands. We expect technical requirements of
voice and audio solutions in mobile devices to evolve rapidly. Improvements in existing technologies and applications may reduce or eliminate the need for our products. The role played by our products may also be filled by products combining voice
and audio processing and other aspects of the voice and audio subsystem. Improvements in other emerging technologies, such as reduction of background noise through MNO network components, could have a similar effect. Our future growth depends on our
ability to anticipate future market needs and to successfully design, develop, market and sell new products that provide increasingly higher levels of user experience, performance, functionality and reliability, that meet the cost expectations of
our OEMs. We may also need to expand our product portfolio to perform some of the other functions of the voice and audio subsystems in mobile devices to achieve widespread market acceptance. Developing our products is expensive and the development
investment may involve a long payback cycle. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain and extend our competitive position.

Our new products must address technological changes and evolving industry standards and may not achieve market acceptance. In the event that new products require
features that we have not developed or licensed, we will be required to develop or obtain such technology through purchase, license or other arrangements. If the required technology is not available on commercially reasonable terms, or at all, we
may incur additional expenses in an effort to internally develop the required technology.

We cannot assure you if or when the products and solutions on
which we have focused our research and development expenditures will become commercially successful or generate a sufficient return. Despite our efforts to develop new and successful voice and audio processor solutions, our competitors, many of whom
have greater financial and engineering resources than we do, may be able to introduce new processors or develop new technologies more quickly than we can. If our investments in research and development do not provide the desired returns in a timely
manner or if the new solutions we develop do not achieve market acceptance, our ability to attract and retain OEMs could be impaired, our competitive position could be harmed and our revenue could be reduced. In addition, we may not have sufficient
resources to maintain the level of investment in research and development required to remain competitive or succeed in our strategy.

Our sales cycles can be long and unpredictable. Our sales efforts often require substantial time and expenses
and are often more than a year in advance of the first commercial sale of the mobile devices including our products.

Our sales efforts involve
educating our current and prospective OEMs and MNOs about the use and benefits of our processors as compared to sound quality solutions they currently use or other solutions that are available. OEMs often undertake a significant design, evaluation
and test process that can result in a lengthy sales cycle that ranges from nine to 12 months, but has, in some cases, exceeded 12 months from initial contact to the award of a design win. We spend substantial time and resources on our
sales efforts without any assurance that they will result in a design win or that the mobile device will be produced at scale. The award of design wins by our current and prospective OEMs are frequently subject to bill of material constraints,
multiple approvals and a variety of administrative, processing and other delays. Purchases of our processors may also occur in connection with a new product launch, which may be delayed or postponed indefinitely. Once we secure a design win, it may
be 12 to 24 months before the OEM begins commercial production of a corresponding mobile device and we begin to generate revenue. The effect of these factors tends to be magnified in the case of substantial mobile device redesigns that are
unrelated to our products.

The selection processes for mobile device designs are lengthy and can require us both to incur significant design and
development expenditures and dedicate significant engineering resources in pursuit of a single OEM opportunity. We may not win the competitive selection process and may never generate any revenue despite incurring significant design and development
expenditures. These risks are exacerbated by the fact that some of our OEMs products likely will have short life cycles. Failure to obtain a design win could prevent us from supplying an entire generation of a product. This could cause us to
lose revenue and require us to write off obsolete inventory and could weaken our position in future competitive selection processes.

Our lengthy and
uncertain sales cycles make it difficult for us to predict when OEMs may purchase and accept products from us or sell mobile phones that have integrated our licensed processor IP, may prevent us from recognizing revenue in a particular quarter and
ultimately may not produce any sales. As a result, our operating results may vary significantly from quarter to quarter.

If we are unable to
adequately control our cost of revenue, our gross margins could decrease, we may not sustain or maintain profitability and our business, financial condition, operating results and cash flows could suffer.

The largest component of our cost of revenue is production costs of our processors. We have made, and expect to continue to make, significant efforts to reduce the
cost of our processors, including but not limited to wafer costs. Our processors are fabricated by Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), for which we are not a large customer. We rely on third parties, such as Signetics Corporation
(Signetics), for assembly, packaging and test. The low volume of our orders relative to other customers at these suppliers makes it difficult for us to control the cost of the fabrication of our processors. As compared to our larger competitors, we
typically do not purchase a sufficiently high volume of wafers and services to obtain the discounts that our larger competitors may be able to obtain from their foundries and other suppliers. We do not have long-term supply contracts with our
suppliers, which further limits our ability to control costs. If we are unable to reduce, or maintain controls over, our cost of manufacturing relative to our selling prices, our business, financial condition, operating results and cash flows could
be materially and adversely impacted.

We may experience difficulties demonstrating the value to OEMs and MNOs of newer, higher priced and higher
margin products if they believe our existing products are adequate to meet user expectations regarding sound quality, which would cause our revenue to decline and negatively affect our business, financial condition, operating results and cash flows.

As we develop and introduce new solutions, we face the risk that OEMs may not understand or be willing to bear the cost of incorporating these
newer solutions into their mobile devices. MNOs may also be unwilling to require OEMs to include newer sound quality solutions if they believe users are satisfied with current solutions. Transitioning OEMs and MNOs to newer generations of solutions
involves a substantial amount of time educating them on the benefits provided by the newer solutions, particularly since there are currently no common objective measures or testing standards for sound quality. Regardless of the improved features or
superior performance of the newer solutions, OEMs may be unwilling to adopt our new solutions as a result of design or bill of material constraints associated with their new mobile device introductions. We must also successfully manage product
transition in order to minimize disruption in our OEMs ordering and purchasing patterns, provide timely availability of sufficient supplies of new products to meet OEM demand and avoid reductions in the demand for our existing processors. If
we fail to manage the transition successfully, we may have to write down or write off excess inventory of the older generation of processors. Due to the extensive time and resources that we invest in developing new solutions, if we are unable to
sell OEMs new generations of our solutions, our revenue could decline and our business, financial condition, operating results and cash flows could be negatively impacted.

We are dependent on sales of mobile devices that incorporate our voice and audio processors and our processor IP, and a decline in the demand for these mobile devices could harm our business.

Since inception, our revenue has been generated from the sale of processors for mobile devices. Continued market adoption of mobile device sound
quality solutions is critical to our future success. Our success is also dependent on our OEMs ability to successfully commercialize their mobile devices in which our solutions are incorporated. The markets for our OEMs mobile devices
are intensely competitive and are characterized by rapid technological change. These changes result in frequent product introductions, short product life cycles and increased device convergence and capabilities. Mobile devices incorporating our
solutions may not achieve market success or may become obsolete. We cannot assure you that our OEMs will dedicate the resources necessary to promote and commercialize mobile devices incorporating our solutions, successfully execute their business
strategies for these mobile devices, be able to manufacture quantities sufficient to meet demand or cost effectively manufacture mobile devices at high volume. Any of these factors, as well as more general mobile device industry issues, could result
in a decline in sales of mobile devices that incorporate our products. If demand for our products or our OEMs mobile devices were to decline, fail to continue to grow at all or in a manner consistent with expectations, our revenue would
decline and our business would be harmed.

If our voice and audio processors fail to integrate or interoperate with our OEMs product designs,
including various system control and audio interface protocols, we may be unable to maintain or increase market segment share and we may experience reduced demand for our processors.

Our products must integrate and interoperate with our OEMs existing and future mobile devices, including components such as baseband processors, audio codecs, microphones and software applications, each of
which may have different specifications. When new or updated versions of these

components, interface protocols or software applications are introduced, or if we find defects in other vendors or our OEMs software or hardware or an incompatibility or deficiency in
our products, we may need to develop updated versions of our products so that they interoperate properly. We may not complete these development efforts quickly, cost effectively or at all. These development efforts may require substantial capital
investment and the devotion of substantial resources. If we fail to achieve and maintain compatibility with components, interface protocols or software applications, our products may not be able to fulfill our OEMs requirements, or we may
experience longer design win and development cycles or our solutions may be designed out of mobile devices. As a result, demand for our products may decline and we may fail to increase or maintain market segment share.

We are subject to business uncertainties that make it difficult to forecast demand and production levels accurately and to have our products manufactured on a
timely basis, which could interfere with our ability to deliver our processors and generate sales.

Sales of our processors are generally based
on purchase orders with our OEMs rather than long-term purchase commitments. As a result, it is difficult to accurately forecast OEM demand for future periods. Our primary foundry, TSMC, produces integrated circuits for other fabless semiconductor
companies in volumes that are far greater than ours. We do not have supply or timing commitments from TSMC and our production orders are typically filled on a delayed basis as production capacity becomes available between larger orders. In order to
secure foundry space for the production of our processors on a timely basis and to ensure that we have sufficient inventory to meet our OEMs demands, we place orders with TSMC well in advance of receipt of OEM orders. If we inaccurately
forecast demand for our processors, we may have excess or inadequate inventory or incur cancellation charges or penalties. Excess inventory levels could result in unexpected charges to operations that could adversely impact our business, financial
condition, operating results and cash flows. Conversely, inadequate inventory levels could cause us to forego revenue opportunities, potentially lose market segment share and harm our OEM relationships. As we continue to introduce new products, we
may need to achieve volume production rapidly. We may need to increase our wafer purchases, foundry capacity and assembly, packaging and test operations if we experience increased demand. The inability of TSMC to provide us with adequate supplies of
our processors on a timely basis, or an inability to obtain adequate quantities of wafers or packages, could cause a delay in our order fulfillment and could interfere with our ability to generate revenue.

We rely on a limited number of manufacturing, assembly, packaging and test, as well as logistics, contractors, in some cases single sources, and any
disruption or termination of these arrangements could delay shipments of our voice and audio processors and reduce our revenue.

We rely on a
limited number of contractors for several key functions in producing our processors, including the processors themselves, which are primarily manufactured by TSMC. We also rely on third parties, such as Signetics, for assembly, packaging and test,
and other contractors for logistics. This reliance on a limited number of contractors involves several risks, including:

If any of these contractors were to cancel or materially change their commitments to us or fail to meet the quality or
delivery requirements needed to allow us to timely manufacture, assemble, package, test and deliver our processors, we could lose time-sensitive OEM orders or be forced to pay damages for the cost of replacement components, be unable to develop or
sell certain processors cost effectively or on a timely basis, if at all, and experience significantly reduced revenue. In the event that it became necessary to find other contractors, transition to a new vendor could take significant time due to
the technology development process and other qualification criteria for a different contractor. For example, developing a second source foundry for one of our products could require us to redesign the product to meet the specialized requirements of
that foundry. Inadequate supplies of critical components, such as wafers or packages, may also impair our ability to fulfill orders in a given quarter and/or result in a decrease in our gross margins.

We currently rely primarily on TSMC to manufacture our processors. Our reliance on TSMC reduces our control over the fabrication process, exposing us to risks,
including reduced control over quality assurance, production costs and product supply. If we fail to manage our relationship with TSMC effectively, or if TSMC experiences delays, disruptions, capacity constraints or yield problems in its operations,
our ability to ship products to our OEMs could be impaired and our competitive position and reputation could be harmed. We do not have a supply agreement with TSMC and TSMC is under no obligation to continue to supply us at all or at the capacity we
need. We are a relatively small customer of TSMC and, in times of capacity constraint, we may not receive the capacity allocation we need. If TSMC is unwilling or unable to meet our production requirements, we would be required to engage a new
foundry. Qualifying a new foundry and commencing volume production would be expensive and time consuming. While we have engaged GLOBALFOUNDRIES Inc. (Globalfoundries) to produce prototypes for some of our products, the transfer of additional
products to Globalfoundries may require significant redesign of such processors. Any redesign may take nine months or more to complete and may involve further delays if such redesigned products do not meet our or our OEMs performance
specifications. If we are required to change foundries or move between production lines of a particular foundry or other supplier for any reason, this could disrupt the supply of our processors and increase our costs.

Disruption or termination of supplies from TSMC or Globalfoundries and problems with yield of good die from the wafers we purchase from them could delay shipments
of our products and materially and adversely affect our operating results. Production delays and quality defects are often outside of our control and are difficult to predict. Any delay of shipments or the existence of defects in our products could
damage our relationships with current and prospective OEMs, increase our costs due to the time and money spent remedying the defects and reduce our revenue.

If flaws in the design, production or test of our processors were to occur, we could experience a failure rate in our products that could result in substantial yield reductions, increased manufacturing costs and
harm to our reputation. Even minor deviations in the manufacturing process can cause substantial manufacturing yield losses or cause halts in production. We have in the past, and may in the future, experience quality problems with the die provided
by our foundries. Our foundries may not be able to detect these defects early in the fabrication process or determine the cause of such defects in a timely manner, which may affect the quality or reliability of our products. Although we have
procedures in place to monitor the quality of our foundries processes, we cannot assure you that our efforts will be sufficient to avoid a rate of failure in our processors that results in substantial delays in shipment or significant repair
or replacement costs, any of which could result in lost sales, harm to our reputation and an increase in our operating costs.

Any errors or defects discovered in our products after commercial release could result in a loss of OEM business, a
termination of design wins or increased warranty costs, any of which may adversely affect our business, financial condition, operating results and cash flows. We may also face claims for product liability and breach of warranty, including claims
relating to the manner in which our products interact with other components of mobile devices produced by our OEMs. We may also be required to indemnify our OEMs for losses allegedly caused by our voice and audio solutions that are incorporated into
their mobile devices. Any warranty or other rights we may have against our suppliers for yield or other quality issues caused by them may be more limited than those our OEMs have against us, based on our relative size, bargaining power or otherwise.
We cannot assure you that our warranty reserves will be sufficient or either increase or decrease in future periods. Defending a lawsuit, regardless of its merit, could be costly and might divert managements attention and adversely affect the
markets perception of us and our solutions. In addition, if the amount and scope of our business liability insurance coverage proves inadequate for a claim, or future coverage is unavailable on acceptable terms or at all, our business,
financial condition, operating results and cash flows could be harmed.

Our voice and audio processors may fail to meet OEM or MNO specifications
or may contain undetected software or hardware defects, either of which could cause degradation in sound quality that might result in liability to us or our OEMs or MNOs, harm to our reputation, a loss of OEMs and a reduction in our revenue.

Our processors are highly technical and complex. In many cases, our processors are assembled in customized packages or feature high levels of
integration. Our products may fail to meet exacting OEM specifications for sound quality, performance and reliability or may contain undetected errors, defects or security vulnerabilities that could result in degradation in voice and audio data
quality. Some errors in our processors may only be discovered after they have been incorporated into our OEMs mobile devices. Resolving these errors and defects may require a significant amount of time and resources. If our voice and audio
processors fail to meet OEM or MNO specifications or contain undetected software or hardware defects, we and our OEMs or MNOs may incur liability, our reputation and relationships with our OEMs and MNOs may be harmed and our revenue and results of
operations may be adversely affected.

If we are unable to maintain or expand our relationships with MNOs or establish new MNO relationships, we
may not be able to affect MNO demand for mobile devices that meet high sound quality specifications, which may limit our growth and adversely affect our business, financial condition, operating results and cash flows.

We have invested and continue to invest significant resources in working with MNOs to educate them about the impact of sound quality on the user experience in order
to increase awareness of and demand for our processors. We also intend to collaborate with MNOs in new geographic markets in order to extend our geographic reach. MNOs may not value the improvements in sound quality that our products can provide.
The specifications that MNOs impose on their OEMs may not be sufficiently high to differentiate our processors compared to the solutions of our competitors. MNOs may grant waivers to their sound quality specifications if individual mobile devices do
not meet the specifications but provide other benefits to users. We do not have and do not expect to have any influence on whether a MNO waives compliance with its specifications. In addition, mobile device specifications and the level of control of
MNOs over the mobile devices operating on their networks vary by OEM and geography. We do not have any long-term contracts with the MNOs we work with and these MNOs have no obligation to require the use of our products by their OEMs or to impose or
enforce a certain level of sound quality specifications. If we are unable to maintain or expand our relationships with MNOs, we may not realize the potential benefits that we believe these relationships can provide. We cannot

assure you that MNOs will continue to work with us to assess and evaluate their voice and audio requirements. If we are unable to maintain or expand our existing relationships with MNOs or enter
into new MNO relationships, demand for our products may decline and our business, financial condition, operating results and cash flows may be adversely affected.

Our ability to benefit from net operating loss carryforwards (NOLs) may be impaired as a result of future ownership changes or changes in tax laws.

To date, we have not paid material income taxes due to our historical losses. We have significant NOLs in the United States. These NOLs will expire at various times
in the future or may be rescinded with changes in tax laws or regulations. Any changes that may affect our NOLs would affect our ability to estimate our provision for income tax in the future.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (Internal Revenue Code), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its
NOLs generated prior to such ownership change to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders (generally, 5% stockholders, applying certain aggregation and look-through
rules) increases by more than 50 percentage points over such stockholders lowest percentage ownership during the testing period (generally, three years). We have in the past experienced ownership changes that have resulted in limitations
on the use of a portion of our NOLs under Section 382 of the Internal Revenue Code. If we undergo further ownership changes in connection with or after this public offering, our ability to utilize NOLs could be limited by Section 382 of
the Internal Revenue Code. Future changes in our stock ownership such as certain stock issuances and transfers between stockholders, some of which changes are outside of our control, could result in an ownership change under Section 382 of the
Internal Revenue Code. Similar rules may apply in other jurisdictions. In addition, the State of California has currently suspended the use of NOLs to offset taxable income for California taxpayers that have preapportioned taxable income of $300,000
or more for the 2010 and 2011 taxable years. For these reasons, it is possible that we may not be able to utilize a significant portion of our NOLs.

Our future effective income tax rates could be affected by changes in the relative mix of our operations and income among different geographic regions and by
proposed and enacted U.S. federal income tax legislation, which could affect our future operating results, financial condition and cash flows.

We seek to structure our worldwide operations to take advantage of certain international tax planning opportunities and incentives. Our future effective income tax
rates could be adversely affected if tax authorities challenge our international tax structure or if the relative mix of our U.S. and international income changes for any reason, or if U.S. or international tax laws were to change in the future. In
particular, recent changes to U.S. tax laws as well as proposed tax legislation that could become law in the future could substantially impact the tax treatment of our foreign earnings. These proposed and enacted changes, including limitations on
our ability to claim and utilize foreign tax credits and deferral of interest expense deductions until non-U.S. earnings are repatriated to the United States, could negatively impact our overall effective tax rate and adversely affect our operating
results. We cannot assure you that our effective tax rate will not increase in the future.

We may not be able to sustain or manage any future growth effectively. If we fail to manage our growth
effectively, we may be unable to execute our business plan, sell our voice and audio solutions successfully and adequately address competitive challenges. As a result, our business, financial condition, operating results and cash flows may suffer.

In recent periods, we have significantly expanded the size and scope of our business. Our future growth prospects depend in large part on our
ability to secure design wins and orders from a broader OEM base, our ability to establish and expand our relationships with key suppliers to expand our product manufacturing, assembly, packaging, test and delivery capacity and our ability to manage
our growing business effectively. Continued growth in our business will place significant demands on our managerial, administrative, operational, financial and other resources. Successful management of any future growth will require substantial
management attention with respect to, among other things:



maintaining and expanding our relationships with OEMs and MNOs and educating and supporting their product design and quality personnel;



anticipating and meeting the technology needs of users;



continuing to expand and improve our intellectual property portfolio and making technological advances;



expanding our relationships with our foundries and assembly, packaging, test and logistics providers and entering into new relationships with additional
foundries, assembly, packaging, test and logistics providers to ensure that we can produce, test and deliver sufficient processors to meet market demand;



recruiting, hiring, integrating and retaining highly skilled and motivated individuals, including research and development and sales personnel;



expanding and broadening our product development capabilities, including establishing and managing our own design center outside the United States;



accurately forecasting revenue and controlling costs;



enhancing and expanding our infrastructure;



managing inventory levels;



expanding our international operations and managing increasingly dispersed geographic locations and facilities; and

If we are unable to execute our growth strategy effectively or to manage any future growth we may experience, we may not be able to
take advantage of market opportunities, execute our business plan, sell our voice and audio solutions successfully, remain competitive, maintain OEM relationships or attract new OEMs. Our failure to effectively sustain or manage any future growth we
do experience could result in a reduction in our revenue and materially and adversely affect our business, financial condition, operating results and cash flows.

If we are unable to attract and retain highly qualified personnel, our business, financial condition, operating results and cash flows would be harmed.

Our future success depends on our continued ability to attract and retain highly qualified technical, sales, support and management personnel. In particular, our
ability to improve and maintain our

technology requires talented software and hardware development engineers with specialized skills in areas such as CASA algorithms, acoustic engineering, digital and analog integrated circuit
design and mobile systems design and integration. If we are unable to recruit and retain these engineers, the quality and speed with which our solutions are developed would likely be seriously compromised and our reputation and business would suffer
as a result. Our sales positions require candidates with specific sales and engineering backgrounds in the integrated circuit or mobile device manufacturing industries and we may be unable to locate and hire individuals with these credentials as
quickly as needed, if at all. Once new sales personnel are hired, we need a reasonable amount of time to train them before they are able to effectively and efficiently perform their responsibilities. Failure to hire and retain qualified sales
personnel could adversely impact our sales. Competition for these and the other personnel we require, particularly in the Silicon Valley area, is intense and we compete for these personnel with large, established publicly traded companies. We may
fail to attract or retain highly qualified technical, sales, support and management personnel necessary for our business. If we are unable to attract and retain the necessary key personnel, our business, financial condition, operating results and
cash flows could be harmed.

We may make acquisitions in the future that could disrupt our business, cause dilution to our stockholders, reduce our
financial resources and harm our business.

In the future, we may acquire other businesses, products or technologies. We have not made any
acquisitions to date and do not have any agreements or commitments for any specific acquisition at this time. Our ability to make and successfully integrate acquisitions is unproven. If we complete acquisitions, we may not strengthen our competitive
position or achieve our goals in a timely manner, or at all, and these acquisitions may be viewed negatively by OEMs, financial markets or investors. In addition, any acquisitions we make could lead to difficulties in integrating personnel,
technologies and operations from the acquired businesses and in retaining and motivating key personnel from these businesses. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to
additional liabilities, increase our expenses and adversely impact our business, financial condition, operating results and cash flows. Acquisitions may also reduce our cash available for operations and other uses and could result in an increase in
amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business.

The political and economic conditions of the countries in which we conduct business and other factors related to our international operations could adversely affect our business, financial condition,
operating results and cash flows.

We have generated substantially all of our revenue from sales to contract manufacturers (CMs) and OEMs that
manufacture in Asia and we expect sales to such CMs and OEMs to contribute a majority of our revenue in the foreseeable future. We have sales and technical support personnel in countries other than the United States and we outsource all
manufacturing, assembly, packaging and test of our processors to third parties in Asia, as well as a portion of product development to a third party in India. We may open our own research and development operation outside of the United States during
2012, establish administrative offices offshore and continue to add sales personnel in additional countries. Our international operations subject us to a variety of risks, including:



difficulties in managing and staffing international offices and increased travel, infrastructure and legal compliance costs associated with multiple
international locations;



the challenge of managing a development team in geographically disparate locations;

impediments to the flow of foreign exchange capital payments and receipts due to exchange controls instituted by certain foreign governments;



tariffs and trade barriers and other regulatory or contractual limitations on our ability to sell or develop our processors in various foreign markets;



difficulties in obtaining governmental and export approvals for communications, processors and other products;



restrictions imposed by the U.S. government on our ability to do business with certain companies or in certain countries as a result of international political
conflicts;



increased exposure to foreign currency exchange rate risk;



burdens of complying with a wide variety of complex foreign laws and treaties and unanticipated changes in local laws and regulations, including tax laws;



potentially adverse tax consequences;



reduced protection for intellectual property rights in some countries; and



political and economic instability.

As we
expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. Our failure to manage any of these risks successfully could adversely affect our business, financial condition,
operating results and cash flows.

If we need additional capital in the future, it may not be available to us on favorable terms, or at all.

We cannot assure you that we will be successful in executing our business plan, maintaining and growing our existing OEM base or achieving and
sustaining profitability. Failure to generate sufficient revenue, achieve planned gross margins or control operating costs may require us to raise additional capital through equity or debt financing. Such additional financing may not be available on
acceptable terms, or at all and could require us to modify, delay or abandon some of our planned future expansion or expenditures or reduce some of our ongoing operating costs, which could have a material adverse effect on our business, financial
condition, operating results and cash flows and ability to achieve our intended business objectives. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our
existing stockholders could suffer significant dilution in their percentage ownership and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Our existing credit facilities
preclude us from entering into additional credit agreements, other than in limited circumstances and, as a result, we may be required to issue equity securities rather than obtain additional debt financing.

We are exposed to fluctuations in currency exchange rates that could negatively impact our business, financial condition, operating results and cash flows.

Because a portion of our business is conducted outside of the United States, we face exposure to adverse movements in foreign currency exchange
rates. These exposures may change over time as

business practices evolve and they could have a material adverse impact on our financial results and cash flows. Historically, we have paid our suppliers and sold our products in U.S. dollars. We
have also historically paid our outsourced research and development services provider in U.S. dollars. As we start performing those research and development activities ourselves and have more significant non-U.S. payroll and operating expenses, we
may begin to incur material expenses in currencies other than the U.S. dollar. Increases in the value of these currencies relative to the U.S. dollar could increase our operating expenses. In addition, an increase in the value of the U.S. dollar
could increase the real cost of our products to our OEMs that produce and sell their mobile devices outside of the United States. This may increase pressure on and result in erosion of our average sales prices without any offset in our production
costs if we continue to pay those expenses in U.S. dollars, which could compress our margins. Average selling price erosion, compressed margins and increased operating expenses could have a negative effect on our business, financial condition,
operating results and cash flows.

Our business is vulnerable to interruption by events beyond our control, including earthquakes, fire, floods,
disease outbreaks and other catastrophic events.

Our corporate headquarters and the operations of our key OEMs, foundries and third-party
contractors are located in areas exposed to risks of natural disasters such as earthquakes and tsunamis, including the San Francisco Bay area, Singapore, China, Japan and Taiwan. A significant natural disaster, such as an earthquake, tsunami, fire
or flood, or other catastrophic event such as disease outbreak, could have a material adverse impact on our business, financial condition, operating results and cash flows. In the event that any of our OEMs or MNOs information technology
systems, manufacturing facilities or logistics abilities are impeded by any of these events, shipments could be delayed and we could miss key financial targets, including revenue and earnings estimates, for a particular quarter.

Risks related to regulations to which we may be subject and our intellectual property

Concerns over possible health and safety risks posed by mobile devices may result in the adoption of new regulations and may otherwise reduce the demand for our products and those of our OEMs.

Concerns over the effects of radio frequency emissions, even if unfounded, may have the effect of discouraging the use of mobile devices, which
may decrease demand for our products and those of our OEMs. In recent years, the Federal Communications Commission (FCC) and foreign regulatory agencies have updated the guidelines and methods they use for evaluating radio frequency emissions from
radio equipment, including mobile phones and other mobile devices. In addition, interest groups have requested that the FCC investigate claims that wireless communications technologies pose health concerns and cause interference with airbags,
hearing aids and medical devices. Concerns have also been expressed over the possibility of safety risks due to a lack of attention associated with the use of mobile devices while driving. These concerns and any future legislation that may be
adopted in response to them, could reduce demand for our products and those of our OEMs in the United States as well as other countries, which could materially and adversely affect our business, financial condition, operating results and cash flows.

Claims of infringement against us or our OEMs could increase our expenses, disrupt our ability to sell our voice and audio solutions and reduce
our revenue.

The mobile communications industry is characterized by the existence of a large number of patents, trademarks, trade secrets and
copyrights and by frequent litigation based on allegations of infringement

or other violations of intellectual property rights. Third parties may claim that our processors or technologies infringe or misappropriate their intellectual property rights. We expect that
infringement claims and misappropriation claims may increase as the number of products and competitors in our market increases and as we gain greater visibility and market exposure as a public company. We cannot assure you that we do not currently
infringe or misappropriate, or that we will not in the future infringe or misappropriate, any third-party patents or other proprietary rights. For instance, because patent applications in the United States and foreign jurisdictions are typically
maintained in confidence for up to 18 months after their filing or, in some cases, for the entire time prior to issuance as a U.S. patent, third parties may have earlier filed applications covering methods or other inventions that we consider
our trade secrets. The limited size of our patent portfolio may not provide meaningful deterrence against third parties alleging that we infringe their patents, particularly against patent holding companies or other adverse patent owners who have no
relevant product revenue. Any claims of infringement or misappropriation by a third party, even those without merit, could cause us to incur substantial costs defending against the claims and could distract our management from our business. A party
making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from offering our processors or licensing our processor
IP. In addition, we might be required to seek a license for the use of the infringed intellectual property, which might not be available on commercially reasonable terms or at all. Alternatively, we might be required to develop noninfringing
technology, which could require significant effort and expense and might ultimately be unsuccessful. Any of these events could seriously harm our business, financial condition, operating results and cash flows.

Third parties may also assert infringement claims against our OEMs. Claims against our OEMs may require us to initiate or defend potentially protracted and costly
litigation on an OEMs behalf, regardless of the merits of these claims, because we generally agree to defend and indemnify our OEMs with which we have long-term agreements from claims of infringement and misappropriation of proprietary rights
of third parties based on the use or resale of our products. Other OEMs, with which we do not have formal agreements requiring us to indemnify them, may ask us to indemnify them if a claim is made as a condition to awarding future design wins to us.
Because our OEMs are much larger than we are and have much greater resources than we do, they may be more likely to be the target of an infringement claim by third parties than we would be, which could increase our chances of becoming involved in a
future lawsuit. If any of these claims succeeds, we might be forced to pay damages on behalf of our OEMs that could increase our expenses, disrupt our ability to sell our voice and audio solutions and reduce our revenue. A party making an
infringement claim against our OEMs, if successful, could secure an injunction or other court order that could prevent our OEMs from producing or selling their mobile devices incorporating our products. Any such claims or injunction against our OEMs
could seriously harm our business, financial condition, operating results and cash flows.

It is also not uncommon for foundries, packaging providers or
suppliers of other components in our processors to be involved in infringement lawsuits by or against third parties. Although some of our foundries, packaging providers or other suppliers are obligated to indemnify us in connection with infringement
claims related to their intellectual property rights, these parties may contest their obligations to indemnify us, or their available assets or indemnity obligation may not be sufficient to cover our losses. Third-party intellectual property
infringement claims that involve us or our suppliers may require us to alter our technologies, obtain licenses or cease certain activities.

We may not be able to protect and enforce our intellectual property rights, which could harm our competitive
position and reduce the value of our proprietary technology.

Our success depends in part on obtaining, maintaining and enforcing our patent and
other proprietary rights. We rely on trade secret, patent, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. The steps we have taken to protect our proprietary
rights may not be adequate to prevent misappropriation of our proprietary information or infringement of our intellectual property rights and our ability to prevent such misappropriation or infringement is uncertain, particularly in countries
outside of the United States. We do not know whether any of our pending patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims. As of December 31, 2011, we had six
issued U.S. patents, 72 pending U.S. patent applications and 37 pending foreign patent applications. Our patents may be contested, circumvented, found unenforceable or invalidated and we may not be able to prevent third parties from
infringing them. Moreover, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages and, as a result, our competitors may be able to copy or develop technologies similar or superior to
ours. In some countries where our processors are sold or may be sold, we do not have foreign patents or pending applications corresponding to some of our U.S. patents and patent applications. Even if foreign patents are granted, effective
enforcement in foreign countries may not be available.

Protecting against the unauthorized use of our technology, trademarks and other proprietary
rights is expensive and difficult. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Any such
litigation could result in substantial costs and diversion of management resources, either of which could harm our business, financial condition, operating results and cash flows. Litigation also puts our patents at risk of being invalidated or
interpreted narrowly and our patent applications at risk of not issuing. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. Many of our current and potential
competitors have the ability to dedicate substantially greater resources to enforcing their intellectual property rights than we have. We may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Patent protection outside of the United States is generally not as comprehensive as in the United States and may not protect our intellectual property
in some countries where our processors are sold or may be sold in the future. Even if patents are granted outside of the United States, effective enforcement in those countries may not be available. For example, the legal regime protecting
intellectual property rights in China is relatively weak and it is often difficult to create and enforce such rights. We may not be able to effectively protect our intellectual property rights in China or elsewhere. Many companies have encountered
substantial intellectual property infringement in countries where we sell or intend to sell processors. If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our processors at competitive
prices and to be a leading provider of processors may be adversely affected and our business, financial condition, operating results and cash flows could be materially and adversely affected.

We rely on the availability of third-party licenses.

Our products include intellectual property
licensed from third parties, such as certain design technology, circuits and manufacturing rights for processor cores. It may be necessary in the future to renew these licenses or obtain additional licenses. We cannot assure you that the necessary
licenses would be available on acceptable terms, or at all. Our failure to obtain, maintain and renew certain

licenses or other rights on favorable terms, or at all, and our involvement in litigation regarding third-party intellectual property rights could have a material adverse effect on our business,
financial condition, operating results and cash flows.

Failure to comply with the U.S. Foreign Corrupt Practices Act (FCPA) and similar laws
associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

We face significant
risks if we fail to comply with the FCPA and other anticorruption laws that prohibit improper payments or offers of payment to foreign governments and political parties by us for the purpose of obtaining or retaining business. In many foreign
countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations. We are in the
early stages of implementing our FCPA compliance program and cannot assure you that all of our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our
policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anticorruption laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment
from U.S. government contracting, which could have a material and adverse effect on our reputation, business, financial condition, operating results and cash flows.

We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.

Because we incorporate U.S. origin technology into our processors, our processors are subject to U.S. export controls and may be exported or licensed outside of the
United States only with the required level of export license or through an export license exception. If a transaction involves countries, individuals or entities that are the target of U.S. or other economic sanctions, licenses or other approvals
from the U.S. Department of the Treasurys Office of Foreign Assets Control or other sanctions authorities may be required and may not be granted. Various countries regulate the importation of certain encryption technology and have enacted laws
that could limit our ability to distribute our processors or license our processor IP in such countries or could limit our OEMs ability to sell mobile devices incorporating our processors in those countries. Changes in our processors or
changes in export or import or economic sanctions regulations may create delays in the introduction of our processors in international markets, prevent our OEMs with international operations from incorporating our processors in their products or, in
some cases, prevent the export or import of our processors to certain countries altogether. Any change in export, import or economic sanctions regulations or related legislation, shift in approach to the enforcement or scope of existing regulations
or change in the countries, persons or technologies targeted by these regulations could result in decreased use of our processors by, or in our decreased ability to export, license or sell our processors to, existing or potential OEMs with
international operations. Failure to obtain required import or export approval for our processors or failure to comply with these regulations could result in penalties and restrictions on export privileges and could impair our ability to compete in
international markets.

We, our OEMs and third-party contractors are subject to increasingly complex environmental regulations and compliance with
these regulations may delay or interrupt our operations and adversely affect our business.

We face increasing complexity in our research and
development and procurement operations as a result of requirements relating to the materials composition of many of our processors, including the European Unions (EUs) Restriction on the Use of Certain Hazardous Substances in Electrical
and

Electronic Equipment (RoHS) directive, which restricts the content of lead and certain other substances in specified electronic products put on the market in the EU after July 1, 2006 and
similar Chinese legislation relating to marking of electronic products which became effective in March 2007. Failure to comply with these laws and regulations could subject us to fines, penalties, civil or criminal sanctions and contract damage
claims, which could harm our business, reputation and operating results. The passage of similar requirements in additional jurisdictions or the tightening of these standards in jurisdictions where our products are already subject to such
requirements could cause us to incur significant expenditures to make our products compliant with new requirements, or could limit the markets into which we may sell our products. Other environmental regulations may require us to reengineer our
processors to use components that are compatible with these regulations and this reengineering and component substitution may result in additional costs to us.

Some of our operations, as well as the operations of our CMs and foundries and other suppliers, are also regulated under various other federal, state, local, foreign and international environmental laws and
requirements, including those governing, among other matters, the discharge of pollutants into the air and water, the management, disposal, handling, use, labeling of and exposure to hazardous substances and wastes and the cleanup of contaminated
sites. Liability under environmental laws can be joint and several and without regard to comparative fault. We cannot assure you that violations of these laws will not occur in the future, as a result of human error, accident, equipment failure or
other causes. Environmental laws and regulations have increasingly become more stringent over time. We expect that our products and operations will be affected by new environmental requirements on an ongoing basis, which will likely result in
additional costs, which could adversely affect our business. Our failure to comply with present and future environmental, health and safety laws could cause us to incur substantial costs, result in civil or criminal fines and penalties and decreased
revenue, which could adversely affect our operating results. Failure by our foundries or other suppliers to comply with applicable environmental laws and requirements could cause disruptions and delays in our product shipments, which could adversely
affect our relations with our OEMs and adversely affect our business and results of operations.

As a result of efforts by us and our third-party
contractors to comply with these or other future environmental laws and regulations, we could incur substantial costs, including those relating to excess component inventory, and be subject to disruptions to our operations and logistics. In
addition, we will need to procure the manufacture of compliant processors and source compliant components from suppliers. We cannot assure you that existing laws or future laws will not have a material adverse effect on our business.

Risks related to this offering and ownership of our common stock

If we experience material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial
condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control
over financial reporting for each fiscal year beginning with the first full fiscal year after the effective date of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our
internal control over financial reporting, as well as an opinion from our independent registered public accounting firm on the effectiveness of our internal

control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a
reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

We
are in the very early stages of the costly and challenging process of hiring personnel and compiling the system and process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our
evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our
internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal
control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or
if our independent registered public accounting firm were to issue an adverse opinion on the effectiveness of our internal control over financial reporting, we would lose investor confidence in the accuracy and completeness of our financial reports,
which would cause the price of our common stock to decline. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could
also restrict our future access to the capital markets.

We will incur increased costs and demands upon management as a result of complying with
the laws and regulations affecting public companies, which could harm our operating results.

As a public company, we will incur significant
legal, accounting, investor relations and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with current corporate
governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act and the Dodd-Frank Act of 2010, as well as rules implemented by the Securities and Exchange Commission (SEC) and the stock exchange
on which we expect our common stock will be traded. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to increase
our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are currently unable to estimate these costs with any degree of certainty. Greater expenditures may be necessary in the future with
the advent of new laws and regulations pertaining to public companies. If we are not able to comply with these requirements in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the
SEC, the applicable stock exchange or other regulatory authorities, which would require additional financial and management resources. We also expect that, as a public company, it will be more expensive for us to obtain director and officer
liability insurance.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business,
our stock price and trading volume could decline.

The trading market for our common stock will depend in part on any research and reports that
securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts start coverage of us, the trading price for
our stock would be negatively impacted. If securities or industry analysts cover us and one or more of these analysts downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If
one or

more of these analysts stops coverage of us or fails to publish reports on us regularly, demand for our stock could decrease which could cause our stock price and trading volume to decline.

Our common stock has no prior public trading market and trading prices could be volatile due to a number of factors.

Before this offering, there has been no public market for shares of our common stock and we cannot assure you that one will develop or be sustained after this
offering. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of our common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. The initial public
offering price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. As a result of these and other factors, the price of our common stock may decline, possibly
materially.

Historically, the trading prices of the securities of technology companies have been highly volatile. Our common stock could trade at prices
below the initial public offering price. Factors that could affect the trading price of our common stock, some of which are outside of our control, include the following:



price and volume fluctuations in the overall stock market from time to time;



significant volatility in the market price and trading volume of technology companies in general and of companies in our industry;



variations in our operating results or those of our competitors or other companies perceived to be similar to us;



actual or anticipated announcements of technological innovations, new services or service improvements, strategic alliances or significant agreements by us or by
our competitors;



the gain or loss of significant OEMs or other developments involving our OEMs;



recruitment or departure of key personnel;



level of sales in a particular quarter;



changes in the estimates of our operating results;



lawsuits threatened or filed against us;



sales of large blocks of our stock or other changes in the volume of trading in our stock;



actual or anticipated changes in recommendations by any securities analysts who elect to follow our common stock;

If the market for technology stocks or the stock market in general experiences loss of investor confidence, the
trading price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our
industry, even if these events do not directly affect us. Each of these factors, among others, could have a material adverse effect on your investment in our common stock. Some companies that have had volatile market prices for their securities have
had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it would likely result in substantial costs and divert managements attention and resources. This could have a material
adverse effect on our business, financial condition, operating results and cash flows.

From time to time, we may release guidance in our earnings releases,
earnings conference calls or otherwise, regarding our future performance that represent our managements estimates as of the date of release. If given, this guidance, which will include forward-looking statements, will be based on projections
prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control. The principal reason that we expect to release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts and other
investors may publish expectations regarding our business, financial performance and results of operations. We do not accept any responsibility for any projections or reports published by any such third persons.

Guidance is necessarily speculative in nature and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or
will vary significantly from actual results. If our actual performance does not meet or exceed our guidance or investor expectations, the trading price of our common stock is likely to decline.

Insiders will continue to have substantial control over us after this offering, which could limit your ability to influence corporate matters.

Upon completion of this offering, our directors, executive officers, principal stockholders and their affiliates will beneficially own, in the
aggregate, approximately % of our outstanding common stock, assuming no exercise of the underwriters option to purchase additional shares. As a result, these stockholders, if acting together, will be able to determine
all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions such as a merger or other sale of our company or our assets. In addition, these stockholders, if acting together, will
have the ability to control the management and affairs of our company. This concentration of ownership could limit your ability to influence corporate matters and might harm the market price of our common stock by:



delaying, deferring or preventing a change in corporate control;



impeding a merger, consolidation, takeover or other business combination involving us; and



discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

For information regarding the ownership of our outstanding stock by our executive officers, directors, principal
stockholders and their affiliates, see the section titled Principal stockholders.

As a new investor, you will experience substantial
dilution as a result of this offering.

The assumed initial public offering price per share is substantially higher than the pro forma net
tangible book value per share of our common stock outstanding before this offering. As a result, investors purchasing common stock in this offering will experience immediate dilution of
$ per share in the pro forma net tangible book value per share from the price paid, based on an assumed initial public offering price of
$ per share (the midpoint of the range set forth on the cover page of this prospectus). Investors who purchase shares in this offering will contribute approximately
% of the total amount of equity capital raised by us through the date of this offering, but will only own approximately % of the outstanding capital stock. In addition, we have issued options and
warrants to acquire common stock at prices significantly below the assumed initial public offering price. To the extent outstanding options and warrants are ultimately exercised, there will be further dilution to investors in this offering. This
dilution occurs because our earlier investors paid substantially less than the initial public offering price when they purchased their shares of common stock. If the underwriters exercise their option to purchase additional shares from us or if we
issue additional equity securities, you will experience additional dilution.

If our existing stockholders sell, or show an intention to sell, substantial amounts of our common stock in the public market
after the contractual lock-up agreements and other restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based on shares outstanding as of December 31, 2011, upon completion of this
offering, we will have outstanding shares of common stock. Of these shares, only the shares of common
stock sold in this offering or shares of common stock sold in this offering if the underwriters over-allotment option were exercised in full, would be freely tradable,
without restriction, in the public market. Our underwriters may, in their sole discretion, permit our directors, officers, employees and current stockholders who are subject to the 180-day contractual lock-up to sell shares before the lock-up
agreements expire. The lock-up may be extended under some circumstances.

At various times after the lock-up agreements pertaining to this offering
expire, up to an additional shares will be eligible for sale in the public market of which 384,437,870 shares were held by directors, executive officers and other affiliates as of December 31, 2011, subject to certain volume and other
limitations under Rule 144 under the Securities Act of 1933, as amended (Securities Act), and in certain cases, various vesting agreements.

The
shares that are either subject to outstanding options under our Stock Plans or reserved for future issuance under any other stock plans and the 3,348,147 shares subject to outstanding warrants as of December 31, 2011 will become eligible for
sale in the public market to the extent permitted by the provisions of various vesting arrangements, the lock-up agreements and Rules 144 and 701 under the Securities Act.

Some of our existing securityholders have demand and piggyback rights to require us to register with the SEC up to 407,505,113 shares of our common stock as of December 31, 2011. If we register these shares of
common stock, the stockholders would be able to sell those shares freely in the public market. Most of these shares are subject to lock-up agreements restricting their sale for 180 days after the date of this prospectus, subject to extension or
reduction. Registration rights are discussed further in the section titled Description of capital stockRegistration rights.

After this offering, we intend to register approximately
shares of our common stock that we have issued or may issue under our Stock Plans. Once we register these shares, they can be freely sold in the public market upon issuance,
subject to the applicable lock-up agreements described above.

The market price of our common stock could decline as a result of sales of a large number
of shares of our common stock or the perception that these sales could occur. This may also make it more difficult for us to raise funds through the issuance of securities. We may issue and/or register additional shares, options, or warrants in the
future in connection with acquisitions, employee compensation or otherwise.

Our management will have broad discretion as to the use of the net
proceeds from this offering and might invest or spend the proceeds in ways with which you might not agree or in ways that may not yield a return.

Our management will have broad discretion to use the net proceeds from this offering and you will be relying on the judgment of our management regarding the
application of these proceeds. Our management might not apply the net proceeds of this offering in ways with which you agree or that increase the value of your investment. We expect to use the net proceeds from this offering for working capital and
general corporate purposes, which may include acquisitions of complementary businesses, products or technologies. We have not allocated these net proceeds for any specific purposes. Our management might not be able to yield a significant return, if
any, on any investment of these net proceeds. You may not have the opportunity to influence our decisions on how to use the net proceeds from this offering. Until the net proceeds are used, they may be placed in investments that do not produce
significant income or that may lose value.

Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or
prevent a change of control of us or changes in our management and therefore depress the trading price of our common stock.

Our certificate of
incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that our stockholders may consider
advantageous. These provisions:



provide that directors may only be removed for cause;



authorize the issuance of blank check preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a
takeover attempt;



eliminate the ability of our stockholders to call special meetings of stockholders;



prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of stockholders;



provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and



establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at
stockholder meetings.

Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of
us by prohibiting stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of discouraging,
delaying or preventing a change in control of us could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

We do not expect to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends for the foreseeable future. We expect to retain all of our future earnings for use in the
development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. In addition, our existing credit agreement precludes us from paying cash dividends.
Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common
stock.

This prospectus contains forward-looking statements that are based on our managements beliefs and assumptions and on information currently available to us.
These forward-looking statements are contained principally in the sections titled Prospectus summary, Risk factors, Managements discussion and analysis of financial condition and results of operations,
Business and Executive compensation. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry
environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as anticipates, believes,
could, seeks, estimates, expects, intends, may, plans, potential, predicts, projects, should, will,
would or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater
detail in Risk factors and elsewhere in this prospectus. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our managements beliefs and
assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our
actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these
forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

This prospectus also contains estimates and other information concerning our industry, including market size and growth rates, which we obtained from industry
publications, surveys and forecasts, including those generated by IDC. This information involves a number of assumptions and limitations and you are cautioned not to give undue weight to these estimates. Although we believe the information in these
industry publications, surveys and forecasts is reliable, we have not independently verified the accuracy or completeness of the information. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of
factors, including those described in the section titled Risk factors.

We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately
$ million, assuming an initial public offering price of $ per share, which is the midpoint of
the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses that we must pay. If the underwriters option to purchase additional shares in
this offering is exercised in full, we estimate that our net proceeds will be approximately $ million after deducting estimated underwriting discounts and commissions and
estimated offering expenses that we must pay. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) our expected net
proceeds by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated offering expenses that we must pay.

We intend to use the net proceeds from this offering
for working capital and other general corporate purposes including research and development and the expansion of our product lines to penetrate new market segments where voice and audio quality impacts the user experience. We may also use part of
the net proceeds to develop technology partnerships and to acquire other businesses, products or technologies. However, we do not have any agreements or commitments for any specific acquisition at this time. Our management will have broad discretion
to use the net proceeds from this offering.

Pending use of net proceeds from this offering, we intend to invest the net proceeds in investment grade,
interest-bearing securities.

Dividend policy

We have never declared or paid cash dividends on our common or preferred stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not
anticipate paying any cash dividends in the foreseeable future. In addition, our existing credit agreement precludes us from paying cash dividends. Any future determination to declare cash dividends will be made at the discretion of our board of
directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may consider relevant.

The following table sets forth our capitalization as of September 30, 2011 as follows:



on an actual basis;



on a pro forma basis after giving effect to the automatic conversion of all outstanding shares of preferred stock and the reclassification of the convertible
preferred stock warrant liability to additional paid-in capital as if such conversion and reclassification had occurred on September 30, 2011; and



on a pro forma as adjusted basis reflecting (i) the conversion of all outstanding shares of preferred stock into common stock upon the closing of this
offering; (ii) the reclassification of the convertible preferred stock warrant liability to additional paid-in capital; (iii) the receipt of the estimated net proceeds from the sale of
million shares of common stock offered by us in this offering at an assumed initial public offering price of
$ , which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated
offering expenses that we must pay; and (iv) the filing of our restated certificate of incorporation immediately prior to the closing of this offering.

You should read this table in conjunction with the sections of this prospectus titled Selected consolidated financial data and Managements discussion and analysis of financial condition and
results of operations and with our financial statements and related notes.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of our common
stock in this offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders equity (deficit) and total capitalization by
$ , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses that we must pay.

If the underwriters option to purchase additional shares in the offering were exercised in full, pro forma as
adjusted cash and cash equivalents, common stock and additional paid-in capital, total stockholders equity (deficit) and total capitalization as of September 30, 2011 would be
$ , $ , $ ,
$ and $ , respectively.

This table excludes the following shares:



115,087,213 shares of common stock issuable upon exercise of options outstanding as of September 30, 2011 at a weighted average exercise price of $0.09 per
share;



23,933,812 shares of common stock reserved for future issuance under our 2011 Plan as of September 30, 2011;



13,552,941 shares of common stock reserved for future issuance under our 2011 ESPP which will become effective on the effective date of the registration
statement of which this prospectus is a part; and



3,348,147 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of September 30, 2011, at a weighted average exercise
price of $0.1209 per share.

See the section titled Executive compensationEmployee benefit plans for a description of
our Stock Plans.

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as
adjusted net tangible book value per share of our common stock immediately after this offering. Our pro forma net tangible book value as of September 30, 2011 was $41.8 million, or $0.10 per share. Our pro forma net tangible book value per
share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by 426,341,948 shares of common stock outstanding as of September 30, 2011 after giving effect to the automatic conversion of
all outstanding shares of preferred stock into shares of common stock upon the closing of this offering.

Net tangible book value dilution per share to
new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after completion of this offering.
After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of
$ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and
estimated offering expenses that we must pay, our pro forma as adjusted net tangible book value as of September 30, 2011 would have been $ million, or
$ per share. This represents an immediate increase in pro forma net tangible book value of
$ per share attributable to existing stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing shares in this offering, as illustrated in the following table:

Assumed initial public offering price per share

$

$

Pro forma net tangible book value per share as of September 30, 2011

Increase in pro forma net tangible book value per share attributable to new investors

Pro forma as adjusted net tangible book value per share after the offering

Dilution of pro forma net tangible book value per share to new investors

$

If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share after the offering
would be $ per share, the increase in pro forma net tangible book value per share to existing stockholders would be
$ per share and the dilution of pro forma net tangible book value per share to new investors purchasing shares in this offering would be
$ per share.

Each $1.00 increase (decrease) in the assumed initial public
offering price of $ per share would increase (decrease) our pro forma as adjusted net tangible book value by
$ million, or $ per share, the increase in pro forma as adjusted net tangible book value
attributable to existing stockholders by $ per share and the dilution in pro forma as adjusted net tangible book value per share to new investors purchasing shares in this
offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated
underwriting discounts, commissions and estimated offering expenses that we must pay.

The following table presents on a pro forma as adjusted basis as of September 30, 2011, the differences between
the existing stockholders and the new investors purchasing shares in this offering with respect to the number of shares purchased from us, the total consideration paid and the average price paid per share:

Shares purchased

Total consideration

Averageprice per

share

Number

Percent

Amount

Percent

(in thousands, except per share data and percentages)

Existing investors

%

$

%

$

New investors

Total

$

If the underwriters exercise their over-allotment option in full, the number of shares held by new investors will increase to
shares, or % of the total number of shares of our common stock outstanding after this offering.

These tables exclude the following shares:



115,087,213 shares of common stock issuable upon exercise of options outstanding as of September 30, 2011 at a weighted average exercise price of $0.09 per
share;



23,933,812 shares of common stock reserved for future issuance under our 2011 Plan as of September 30, 2011;



13,552,941 shares of common stock reserved for future issuance under our 2011 ESPP which will become effective on the effective date of the registration
statement of which this prospectus is a part; and



3,348,147 shares of common stock reserved for issuance upon the exercise of outstanding warrants as of September 30, 2011, at a weighted average exercise
price of $0.1209 per share.

See the section titled Executive compensationEmployee benefit plans for a description of
our Stock Plans.

We derived our selected consolidated statements of operations data for 2008, 2009 and 2010 and our consolidated balance sheet data as of December 31, 2009 and
2010 from our audited consolidated financial statements and related notes included elsewhere in this prospectus. We derived our selected consolidated statements of operations data for 2006 and 2007 and our balance sheet data as of December 31,
2006, 2007 and 2008 from our audited consolidated financial statements and related notes that are not included in this prospectus. We derived our consolidated statements of operations data for the nine months ended September 30, 2010 and 2011
and our balance sheet data as of September 30, 2011 from our unaudited consolidated financial statements included elsewhere in this prospectus. Our unaudited consolidated interim financial statements were prepared on the same basis as our
audited consolidated financial statements and include, in our opinion, all adjustments, which included only normal recurring adjustments, that we consider necessary for the fair presentation of the financial information set forth in those
statements. Historical results are not necessarily indicative of future results.

Year ended December 31,

Nine months endedSeptember 30,

2006

2007

2008

2009

2010

2010

2011

(unaudited)

(in thousands, except share and per share data)

Consolidated statements of operations data:

Revenue

$



$



$

2,454

$

5,749

$

47,920

$

28,165

$

79,716

Cost of revenue(1)





1,729

5,355

19,314

12,061

35,745

Gross profit





725

394

28,606

16,104

43,971

Operating expenses:

Research and development(1)

2,815

6,842

9,147

8,969

11,445

8,266

14,605

Selling, general and administrative(1)

2,147

4,205

6,651

8,058

12,217

8,195

14,870

Total operating expenses

4,962

11,047

15,798

17,027

23,662

16,461

29,475

Income (loss) from operations

(4,962

)

(11,047

)

(15,073

)

(16,633

)

4,944

(357

)

14,496

Interest income (expense), net

490

404

218

11

(17

)

(17

)

(5

)

Other income (expense), net

(27

)

(34

)

367

(136

)

(139

)

12

(557

)

Net income (loss) before cumulative effect of change in accounting principle

Weighted average shares used in computing net income (loss) per share attributable to common stockholders(2):

Basic

13,091,163

13,324,777

13,936,404

15,489,478

18,589,862

17,269,042

27,742,340

Diluted

13,091,163

13,324,777

13,936,404

15,489,478

18,589,862

17,269,042

95,868,291

Pro forma net income per share attributable to common stockholders (unaudited)(2):

Basic

$

0.01

$

0.03

Diluted

$

0.01

$

0.03

Weighted average shares used in computing pro forma net income per share attributable to common stockholders
(unaudited)(2):

Basic

403,189,835

423,899,306

Diluted

403,421,261

494,022,824

December 31,

September 30,

2011

2006

2007

2008

2009

2010

(unaudited)

(in thousands)

Consolidated balance sheet data:

Cash and cash equivalents

$

3,424

$

3,393

$

4,383

$

6,446

$

12,095

$

23,294

Working capital

11,325

6,161

5,363

4,468

25,073

39,670

Total assets

11,743

7,352

8,292

9,934

36,741

55,595

Total debt and capital lease obligations







377

240

137

Convertible preferred stock warrant liability

510

551

(382

)

227

315

871

Total liabilities

750

1,277

1,698

4,736

10,758

14,688

Convertible preferred stock

23,903

29,578

44,280

59,241

74,348

74,348

Common stock and additional paid-in capital

394

478

786

1,128

2,049

3,080

Total stockholders equity (deficit)

$

(12,910

)

$

(23,503

)

$

(37,686

)

$

(54,043

)

$

(48,365

)

$

(33,441

)

(1)

Includes stock-based compensation expense as follows:

Year ended December 31,

Nine months endedSeptember 30,

2006

2007

2008

2009

2010

2010

2011

(unaudited)

(in thousands)

Cost of revenue

$



$



$

8

$

18

$

62

$

39

$

66

Research and development

8

33

97

132

227

154

285

Selling, general and administrative

19

44

93

133

258

175

433

Total stock-based compensation expense

$

27

$

77

$

198

$

283

$

547

$

368

$

784

(2)

See Note 6 to our consolidated financial statements for an explanation of how we arrived at our basic and diluted net income (loss) per share attributable to common
stockholders and pro forma net income per share.

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could
cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled Risk factors and Special note regarding forward-looking statements and industry data
included elsewhere in this prospectus.

Overview

We are the leading provider of intelligent voice and audio solutions that improve voice quality and the user experience in mobile devices. We collaborate with leading auditory neuroscientists to understand the
human auditory system and have developed purpose-built processors that combine science and technology to function like human hearing. Our low power, hardware-accelerated DSPs and associated algorithms substantially improve sound quality and suppress
noise in mobile devices. As the primary driver of the mobile device market, the mobile phone continues to play an increasingly prominent role in peoples lives. Voice communication is a primary function of mobile phones, and we expect voice to
increasingly complement touch as a core user interface, heightening the importance of voice and audio quality in mobile devices.

Our total revenue was
$2.5 million, $5.7 million, $47.9 million and $79.7 million for 2008, 2009, 2010 and the nine months ended September 30, 2011, respectively. Our net income (loss) was $(14.5) million, $(16.8) million,
$4.8 million and $13.9 million for 2008, 2009, 2010 and the nine months ended September 30, 2011, respectively.

We work with OEMs to have
our voice and audio processors designed into their products, which we refer to as design wins. Once our voice and audio processor is designed into a mobile device, we generally sell our processors to CMs retained by OEMs on a purchase order basis,
and the CMs incorporate them into the mobile devices that they build for the OEMs. We sell a limited portion of our products indirectly to OEMs through distributors. For a single OEM, we also license processor IP, which that OEM has integrated into
certain of its mobile phones. Our OEMs products are complex and require significant time to design, launch and ramp to volume production. As a result, our sales cycle is lengthy. We typically commence commercial shipments of our products nine
months to one year following a design win. Because the sales cycle for our products is long, we incur expenses to develop and sell our products, regardless of whether we achieve a design win and well in advance of generating revenue, if any. In
addition, achieving a design win from an OEM does not ensure that the OEM will begin producing the related product in a timely manner, if at all, or that the design win will ultimately generate additional revenue for us.

Historically, our revenue has been significantly concentrated in a small number of OEMs, CMs and distributors and we expect that concentration to continue for the
foreseeable future. Foxconn, one of Apples CMs, accounted for 81% and 70% of our total revenue in 2010 and the nine months ended September 30, 2011, respectively. In 2010 and the nine months ended September 30, 2011, Foxconn and
Protek, the CMs for one of our OEMs, collectively accounted for 82% and 79% of our total revenue, respectively. Samsung accounted for 17% of our total revenue in the nine months ended September 30, 2011. During the three months ended
September 30, 2011, sales to Foxconn and Samsung accounted for 51% and 30% of our total revenue, respectively. No other OEM, CM or

distributor accounted for 10% or more of our total revenue in the three months ended September 30, 2011. HTC accounted for 36% of our total revenue in 2009 and LG accounted for 18% and 45%
of our total revenue in 2008 and 2009, respectively. Sales through Uniquest Corporation (Uniquest), a distributor for Samsung, accounted for 15% of our total revenue in 2009. Pantech accounted for 20% of our total revenue in 2008. Sales through
Midoriya Electric Co., Ltd. (Midoriya), a distributor for Sharp, accounted for 60% of our total revenue in 2008. No other OEM, CM or distributor accounted for 10% or more of our total revenue in 2008, 2009, 2010 or the nine months ended
September 30, 2011. Commencing in the three months ending March 31, 2012, we expect to recognize quarterly royalty revenue for the use of our processor IP in mobile phones of a single OEM.

Headquartered in Mountain View, California, we were incorporated in California in July 2000 and reincorporated in Delaware in June 2011. As of December 31,
2011, we had 189 employees. We began shipping our first generation of voice processors in 2008, our second generation of earSmart voice and audio processors in 2011 and as of December 31, 2011, had sold over 135 million processors
worldwide. Since our inception, we have invested significantly in our product development. We have also invested in protecting our intellectual property and, as of December 31, 2011, had six patents issued and 72 pending patent applications in
the United States and 37 pending foreign patent applications. We have expanded our sales and marketing organizations to support the growth of our business with our OEMs, which include Apple, HTC, LG, Pantech, Samsung, Sharp and Sony. We use a
contract foundry, TSMC, to manufacture our voice and audio processors, as well as third parties, such as Signetics, for assembly, packaging and test, and other contractors for logistics.

Our arrangement with one of our OEMs

On August 6, 2008, we entered into an agreement with Apple. Pursuant
to the terms of the agreement with this OEM, we develop, supply and support our custom voice and audio processors for use in certain mobile devices which this OEM purchases from Foxconn and Protek; however, we cannot assure you that Foxconn and
Protek will continue to purchase our processors in similar volumes, or at all. To date, Foxconn and Protek have purchased a custom version of our voice processor that Foxconn and Protek have incorporated into multiple mobile phone models for this
OEM and this OEM has licensed our processor IP that it has integrated into certain of its mobile phones. Pursuant to our agreement, this OEM will pay us a royalty, on a quarterly basis, for the use of our processor IP in mobile phones in which it is
integrated. Commencing in the three months ending March 31, 2012, we expect to recognize royalty revenue for the use of our processor IP in certain of its mobile phones. We have granted a similar license to this OEM for a new generation of our
processor IP; however, this OEM is not obligated to incorporate our processor IP into any of its current or future mobile devices. For the new generation of our processor IP that we have agreed to license to this OEM, the royalty is subject to a
quarterly maximum, after which we would not receive royalties for shipments of devices into which that processor IP is integrated. We expect that we will continue to provide our processors on a stand-alone basis to Foxconn and Protek to incorporate
into the mobile phones in which they are currently designed; however, Foxconn, Protek and this OEM are not obligated to continue to do so and, even if they do, we cannot predict when these mobile phones may reach the end of their product lifecycles.
In comparison to a business model with OEMs that purchase our processors on a stand-alone basis to incorporate into their mobile devices, the licensing of our processor IP represents a multiyear process, and we may not receive royalties for several
years, if at all, after we agree to license our processor IP.

Under our current license agreement, royalties from our processor IP that we license are
based upon the number of mobile phones shipped that integrate our technology. We expect to recognize royalty

revenue based on mobile phone sales when and as reported to us. The amount of revenue we expect to recognize will be determined by the agreed upon royalty rate, multiplied by the number of mobile
phones sold in which our processor IP is integrated. Our royalty revenue will lag the sales of the products that integrate our processor IP by one quarter. We expect that royalty revenue will be greater than 10% of our total revenue, at which point
we intend to report it as a discrete line item in our statement of operations.

The licensing of our processor IP does not require the manufacture,
assembly, packaging, test or shipment of integrated circuits by us. Our royalty rate per licensed unit will be lower than our average selling price for our processors. Although we expect our royalty revenue to increase as we transition to a partial
licensing model with a single OEM, we expect our revenue from the sale of processors to this OEM and its CMs to decrease substantially in the long term, as the mix of revenue shifts from stand-alone processor sales to royalties. We also expect that
our total revenue from this OEM and its CMs may also decrease as a result of lower royalty revenue per mobile device under the licensing model. Our total revenue may decline if sales to other OEMs do not increase sufficiently to offset the decline.
As the cost of revenue associated with the licensing of our processor IP is substantially lower than our cost of revenue for processors, we expect our gross margin on our royalty revenue to be higher than our gross margin on our processor revenue.

Business factors affecting our performance

Creation of voice and audio improvement as a new category for users. Our success will depend, in part, on increasing market awareness among OEMs,
MNOs, operating system companies and applications vendors of the importance of voice and audio quality on the user experience. User demand for new levels of voice and audio quality will depend on our ability to provide solutions that continue to
improve the user experience and our ability to convey the impact of our solutions on the mobile device ecosystem.

Design wins. We
closely monitor design wins by OEM and product type because we consider design wins to be critical to our future success. The revenue that we generate from each design win can vary significantly and in some cases, our OEMs may cancel projects for
which we have been awarded a design win. Our long-term sales expectations are based on forecasts from OEMs and internal estimations of demand factoring in the expected time to market for final mobile devices incorporating our solutions and
associated revenue potential. Our ability to implement our product roadmap and introduce new products will facilitate the adoption of our solutions into future generations of mobile devices.

We estimate the life cycle of our OEMs mobile devices on the basis of our history with the OEM, the type of mobile device and discussions with our OEMs. A given design win for our processors or processor IP
can generate a wide range of sales volumes for our voice and audio processors, depending on the market demand for our OEMs mobile devices. The market demand for our OEMs mobile devices, in turn, can depend a number of factors, including
the reputation of the OEM, the geographic markets in which the OEM intends to introduce the mobile devices and whether the MNOs on whose networks the mobile devices are designed to operate provide marketing and subsidies for the mobile devices.

Revenue driven by significant customers. Historically, our revenue has been significantly concentrated in a small number of OEMs.
During the nine months ended September 30, 2011, sales to Foxconn and Samsung accounted for 70% and 17% of our total revenue, respectively. No other OEM, CM or distributor accounted for 10% or more of our total revenue in the nine months ended
September 30,

2011. During the three months ended September 30, 2011, sales to Foxconn and Samsung accounted for 51% and 30% of our total revenue, respectively. No other OEM, CM or distributor accounted
for 10% or more of our total revenue in the three months ended September 30, 2011.

While we strive to expand and diversify our OEM base and we
expect our customer concentration to decline over time, we anticipate that sales to a limited number of OEMs will continue to account for a significant percentage of our total revenue for the foreseeable future. Our customer concentration may cause
our financial performance to fluctuate significantly from period to period based on the device release cycles and seasonal sales patterns of these OEMs and the success of their products. The loss of or any significant decline in total revenue from
any of these OEMs may have an adverse effect on our financial condition and results of operations.

Pricing and gross margins of our
products. Our gross margin has been and will continue to be affected by a variety of factors, including the timing of changes in pricing, shipment volumes, new product introductions, changes in OEM concentration and product mixes,
changes in our purchase price of fabricated wafers and assembly and test service costs and inventory write downs, if any. In general, products with higher performance and a higher number of features tend to be priced higher and have higher gross
margins. As we transition to a partial licensing model with Apple, we expect our gross margin to increase but we also expect it to fluctuate over time, in part from the impact of competitive pricing pressure. Erosion of average selling prices as
products mature is typical in the semiconductor industry. Consistent with this historical trend, we expect that the average selling prices of our products will decline as they mature. As a normal course of business, we will seek to offset the effect
of declining average selling prices on existing products by reducing manufacturing costs and introducing new and higher value-added products. If we are unable to maintain overall average selling prices, our gross margin will decline.

Relationships with MNOs. MNOs determine product specifications for OEM products, thereby influencing the design and components selected by OEMs,
which specifications have generated demand for our products. We have invested and continue to invest significant resources in working with MNOs to increase awareness of the potential and benefits of our processors. We intend to continue our work
with MNOs to educate them about the impact of sound quality on the user experience. MNOs may not continue to value the improvements in sound quality that our products can provide and may not require their OEMs to meet certain sound quality
specifications.

General economic conditions and geographic concentration. A global economic slowdown or financial crisis, similar to
the one that occurred beginning in late 2008, would likely have a significant impact on the mobile device industry and our financial results. As the economy slows, consumer confidence may decline and, because our products serve the mobile device
market, any decline in purchases by consumers of new mobile devices would adversely affect our revenue. Moreover, because our sales have been concentrated in a few selected markets, including China, Taiwan and Korea, our financial results will be
impacted by general economic and political conditions in these markets.

Components of our results of operations

Revenue

To date, we have generated product revenue
from sales of our voice and audio processors and we expect the sale of our processors to continue to represent the substantial majority of our revenue. We sell processors through three separate channels. First, we ship a significant portion of our
products to the inventory hubs of CMs and recognize the related revenue as the CMs notify us in writing that they have drawn our products from the hub. Our sales to Foxconn are an example of this type of

arrangement. Second, for certain OEMs, we ship our voice and audio processors directly and recognize revenue at the time of delivery and title transfer. Third, we ship a small portion of our
products to our distributors, which tend to buy from us at the request of specific OEMs, and we recognize revenue on sales to distributors when the distributor notifies us in writing of the final resale of our products.

We anticipate that in the future as significant OEMs prepare worldwide launches of their products, we may see substantial increases in revenue shortly before the
launch. We also anticipate that for some period before the OEM begins building new inventory for the new mobile device or following the launch, we may see reductions in revenue related to our products incorporated in prior generations of devices, as
the OEMs reduce their inventories of those products.

We may enter into license agreements two years or more before we begin to receive royalty revenue
on shipments of the mobile devices incorporating our processor IP. Under a license agreement we entered into in 2008, we expect to begin to recognize royalty revenue in the three months ending March 31, 2012. As part of our 2008 license, we are
entitled to receive a royalty for each mobile device that is sold incorporating and, for mobile devices other than mobile phones, enabling our processor IP. We entered into an additional license agreement in 2010 relating to a new generation of our
processor IP. We do not expect to offer this arrangement to other OEMs and expect a single OEM to be the sole source of our royalty revenue for the foreseeable future.

We will recognize royalty revenue on the basis of the number of mobile phones sold that incorporate our processor IP. We will be reliant on the accuracy of shipment reports, which we expect to receive 45 days
after the OEMs fiscal quarter end, in order to calculate our royalty revenue. Our royalty revenue will lag the sales of mobile phones that integrate our processor IP by one quarter. We have limited rights to audit the shipment data we receive,
which limits our ability to verify calculated royalty revenue or seek redress for reports we believe are not accurate and we have no experience in testing and evaluating the accuracy of the data we will receive. Although mobile phones integrating
our processor IP commenced shipping in the three months ended December 31, 2011, we do not expect to recognize revenue related to those mobile devices until the three months ending March 31, 2012. While we expect our royalty revenue to
increase as we transition from selling our stand-alone processors to its CMs to licensing our processor IP to a single OEM, we also expect our revenue from the sale of processors to its CMs to decrease substantially in the long term. We expect that
our total revenue from this OEM and its CMs will also decrease as a result of lower royalty revenue per mobile phone under the licensing model.

We
maintain sales operations, which include our direct sales force, third-party sales representatives and distributors, in Asia, North America, Japan and Europe. Substantially all of our revenue has been generated by sales to CMs and OEMs that
manufacture their products in Asia and we expect sales to such CMs and OEMs in Asia to contribute a majority of our revenue in the foreseeable future. Because our OEMs market and sell their products worldwide, our revenue by geographic location is
not necessarily indicative of where mobile device sales occur, but rather of where their manufacturing operations occur. Since our inception, our sales in Asia have represented substantially all of our total revenue. As we begin to recognize royalty
revenue, we anticipate that the geographic distribution of our revenue will change as our royalty revenue will be attributed to the location of the licensors headquarters rather than the location of its CMs manufacturing operations.

The largest components of our cost of revenue are costs of materials and outsourced manufacturing costs for the fabrication, assembly, packaging and test of our voice and audio processors. To a lesser extent, cost
of revenue also includes expenses relating to cost of personnel, stock-based compensation, logistics and quality assurance, royalty expense, shipping, provisions for excess and obsolete inventories, if any, and an allocation of overhead. We intend
to continue to manage our cost of revenue through both cost improvements and economies of scale.

We expect our gross margins to fluctuate over time
depending on the mix of newer, higher margin products and older products, whose margins have declined over time, as well as the mix between sales of processors and license of processor IP. In general, new products with higher performance and more
features tend to be priced higher and have higher gross margins. Consistent with trends in the semiconductor industry, we have reduced the price of certain of our products over time and may continue to do so in the future. As a normal course of
business, we seek to offset the effect of declining average selling prices by reducing manufacturing costs of existing products and introducing new and higher value-added products. The license of our processor IP does not require the manufacture,
assembly, packaging, test or shipment of integrated circuits, resulting in higher gross margins than for the sale of stand-alone processors.

Operating expenses

We classify our operating
expenses as either research and development or selling, general and administrative. Personnel-related costs, including salaries, benefits, bonuses and stock-based compensation, are the most significant component of each of our operating expense
categories. In the near term, we expect to hire a significant number of additional employees in order to support our anticipated growth. In any particular period, the timing of additional hires could materially affect our operating expenses.

Research and development. Our research and development expenses consist primarily of personnel-related costs for the
design and development of our products and technologies. Additional research and development expenses include nonrecurring engineering expenses, product prototypes, external test and characterization expenses, depreciation, amortization of design
tool software licenses and allocated overhead expenses. We also outsource portions of our research and development activities. We record all research and development expenses as incurred, except for capital equipment, which we depreciate over its
estimated useful life. We have engineering development teams in the United States and outsourced engineering teams in the United States and India. In 2012, we may open our own design center outside of the United States and reduce the extent to which
we rely on outsourced research and development teams. We expect research and development expenses to increase in absolute dollars for the foreseeable future as we continue to improve our product features and increase our portfolio of solutions. From
time to time, one of our OEMs retains us to provide nonrecurring engineering services, which enhances our proprietary technology. This OEM reimburses us at contractually predetermined rates for the costs we incur to provide these services. We apply
these cost reimbursements against research and development expense when acceptance occurs, which is generally upon cash receipt.

Selling, general and
administrative. Selling, general and administrative expenses consist primarily of personnel-related costs for our sales, business development, marketing, applications engineering, executive, finance and human resources
activities. Additionally, selling, general and administrative expenses include promotional and other marketing expenses, third-party sales representative

commissions, travel, professional fees, depreciation and allocated overhead expenses. Professional fees principally consist of legal, audit, tax and accounting consultation services. We expect
selling, general and administrative expenses to increase in absolute dollars for the foreseeable future as we hire additional personnel, make improvements to our infrastructure and incur significant additional costs for the compliance requirements
of operating as a public company, including the costs associated with public reporting, Sarbanes-Oxley Act requirements and insurance.

Other
income (expense), net

We classify our outstanding convertible preferred stock warrants as a liability on our balance sheet and record changes in
their fair value from period to period in other income (expense), net. This remeasurement may terminate if our convertible preferred stock converts to common stock in connection with the closing of the offering contemplated by this prospectus.

Although a majority of our sales are outside of the United States, we incur a substantial majority of our expenses and receive all of our revenue in
U.S. dollars. As a result, our foreign currency related expense and income has not been material to date.

Income taxes

To date, we have not paid or incurred material income taxes due to our NOLs and tax credits in the United States, for which we have a full valuation allowance.
However, our effective tax rate may fluctuate significantly on a quarterly basis if our ability to utilize our NOLs and tax credits to offset taxable income in any year are significantly limited due to a change of ownership, or if the full valuation
allowance against our U.S. deferred tax assets is released, or if there are significant changes in tax laws or regulations. Our effective tax rate may also fluctuate as we continue to expand our business outside of the United States and align our
legal structure and supply chain to facilitate our expansion and support our commercial needs.

From time to time, we may be subject to income tax audits
by the Internal Revenue Service (IRS) and other tax authorities. We regularly assess the likelihood of adverse outcomes that could result from tax audits to determine the adequacy of our provision for income taxes. While we believe that we have
complied with applicable income tax laws, we cannot assure you that the governing tax authorities will not have a different interpretation of the tax laws and subsequently assess us with incremental income taxes.

Backlog

We do not believe that our backlog as of any
particular date is meaningful, as our sales are made primarily pursuant to purchase orders. Only a small portion of our orders is noncancelable, and the dollar amount associated with the noncancelable portion is not significant.

Critical accounting policies and estimates

Our
consolidated financial statements and the related notes included elsewhere in this prospectus are prepared in accordance with accounting principles generally accepted in the United States (GAAP). In many cases, the accounting treatment of a
particular transaction is specifically dictated by GAAP and does not require our judgment in its application. In other cases, our judgment is required in selecting among available alternative accounting policies that allow different accounting
treatment for similar transactions. The preparation of our consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, costs and expenses and related
disclosures. We base our estimates on our historical experience and various

other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from the estimates we make. To the extent that there are differences
between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows would be affected. We believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates.

Revenue recognition

We derive revenue from the sale
of voice and audio processors to OEMs, CMs and distributors. We recognize revenue from sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, product delivery has occurred and collectability of the
resulting receivable is reasonably assured.

Although we do not recognize revenue from sales to our distributors upon shipment, the title and the risk of
ownership for the products transfer to the distributor upon shipment and the distributor is obligated to pay for the products at that time. In the past, we have occasionally accepted returns from distributors. As a result, we defer revenue
recognition, adjustments to revenue and the related costs of revenue until the distributors notify us in writing of their resale of the products. The amounts billed to distributors and adjustments to revenue and the cost of inventory shipped to, but
not yet sold by the distributors, are shown on our balance sheets as Deferred credits and income. We also take into account the inventories held by our distributors in determining the appropriate level of provision for excess and
obsolete inventory, if any.

We record a provision for estimated sales returns on product sales in the same period we record the related revenue. To
date, returns have not been significant. Our estimates are based on historical returns, analysis of credit memo data and other known factors. Actual sales returns could differ from these estimates.

With respect to a single OEM, we provide rights to integrate certain of our processor IP into its mobile devices. This OEM has agreed to pay royalties based on its
sales of mobile devices integrating and enabling our processor IP. Sales of mobile phones integrating our licensed processor IP began in the three months ended December 31, 2011. We earn royalties on mobile phones integrating our licensed
processor IP at the time of sale. We will recognize royalty revenue based on mobile phone shipments reported during the quarter in which we receive the report, assuming that all other revenue recognition criteria are met at that time because we do
not have other evidence to reasonably estimate the amount of royalties due. The amount of revenue recognized will be determined by multiplying the number of mobile phones sold during a particular quarter in which our processor IP is integrated at
the agreed-upon royalty rate. We will be reliant on the accuracy of shipment reports from this OEM in order to calculate our royalty revenue.

Inventory

Our inventory consists primarily of
completed wafers, processors being assembled or tested by third parties and finished processors. We state our inventories at the lower of standard cost, which approximates actual cost determined on the weighted average basis, or market value. We
routinely evaluate quantities and values of inventory in light of current market conditions and market trends and record provisions for inventories in excess of demand and subject to obsolescence. This evaluation may take into consideration expected
demand, new product development schedules, the effect new products might have on the sale of existing voice and audio processors, product obsolescence, product merchantability and other factors.

We also regularly review the cost of inventories against their estimated market value and record a provision for
inventories that have a cost in excess of estimated market value in order to carry those inventories at the lower of cost or market value.

The recording
of these provisions establishes a new and lower cost basis for each specifically identified inventory item and we do not restore the cost basis to its original level regardless of any subsequent changes in facts or circumstances. Recoveries are only
recognized upon the sale of previously written-down inventories.

Accounting for income taxes

In accordance with the authoritative guidance for income taxes, we make certain estimates and judgments in determining the income tax expense for financial
statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions, as well as the interest and penalties relating to these uncertain tax positions. Estimates and judgments also occur in the recording
of deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense between tax and financial statement reporting. Significant changes to these estimates may increase or decrease our provision for
income taxes in a subsequent period. Similarly, for tax liabilities denominated in a currency other than the U.S. dollar, changes in the value of the denominated currency may increase or decrease our tax provision in a subsequent period.

The calculation of our tax liabilities involves the assessment of uncertainties in the application of complex tax regulations. We recognize liabilities for
uncertain tax positions based on a two-step process. In the first step, recognition, we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criterion. The tax position is measured at the largest amount of benefit that has a greater than
50% likelihood of being realized upon ultimate settlement. Because we are required to determine the likelihood of various possible outcomes, these estimates are inherently difficult and subjective. We reevaluate these uncertain tax positions on a
quarterly basis. This reevaluation is based on factors including, but not limited to, changes in facts or circumstances and tax law. A change in recognition or measurement would result either in the recognition of a tax benefit or in an increase in
the tax provision for the period.

We also assess the likelihood that we will be able to realize our deferred tax assets. If realization is not likely,
we increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate we may not ultimately realize. We establish valuation allowances when necessary to reduce deferred tax assets where management
concludes that it is more likely than not that the deferred tax assets will not be realized based upon the available evidence. We determined that it was more likely than not that our deferred tax assets would not be realized and recorded a full
valuation allowance at that time. Should there be a change in our assessment of our ability to realize our deferred tax assets, our tax provision would decrease in the period in which we determined that it is more likely than not that the benefit of
our deferred tax assets will be realized and the valuation allowance is released.

Stock-based compensation

We measure stock-based compensation at the grant date based on the fair value of the award using the Black-Scholes option pricing model. The fair value is
recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The fair value of our

stock-based awards to nonemployees is estimated based on the fair market value on each vesting date, accounted for under the variable accounting method and is recognized as expense on a
straight-line basis over the requisite service period. In future periods, we expect that our stock-based compensation expense will increase as a result of our existing unrecognized stock-based compensation still to be recognized and expense related
to the issuance of additional stock-based awards in order to attract and retain employees and consultants.

The following table summarizes the options we
granted from October 1, 2010 to September 30, 2011:

We did not grant any stock-based awards between June 29, 2011 and September 30, 2011.

Determining the fair value
of stock-based awards at the grant date requires the input of various assumptions, including the fair value of the underlying common stock, expected future share price volatility, expected term, risk-free interest rate and dividend rate. The
assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of managements judgment. If factors change and we use different
assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate for options we grant and only recognize expense for those shares that we expect to
vest. We estimate the forfeiture rate based upon the historical experience of our stock-based awards that are cancelled. If the actual forfeiture rate is materially different from our estimate, our stock-based compensation expense could be
significantly different from what was recorded in prior periods.

The Black-Scholes model requires the use of highly subjective and complex assumptions
which determine the fair value of stock-based awards. We estimate the fair value of each option award on the date of grant and estimate expected volatility based on the historical volatility of a guideline group of publicly traded companies. The
expected term of options is based upon the simplified method for estimating expected term and the risk-free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity rate. The assumptions used to value options granted
in 2010 and the nine months ended September 30, 2010 and 2011 were as follows:

Expected term. Expected term represents the period over which we anticipate stock-based
awards to be outstanding. As we have and expect to undergo significant operational and structural changes in our business such that the historical exercise data no longer provides a reasonable basis upon which to estimate expected term, the expected
term of the stock-based awards we granted was calculated based on the simplified method. Under the simplified method, the expected term is equal to the average of the stock-based awards weighted average vesting period and its contractual term.
We expect to continue using the simplified method until we have sufficient information.

Expected volatility. The expected
volatility is based on the historical stock volatilities of a group of publicly listed comparable companies over a period equal to the expected terms of the stock-based awards, as we do not have prior trading history to use to determine the
volatility of our common stock. If, in the future, we determine that other methods are more reasonable or other methods for calculating these assumptions are prescribed by authoritative guidance, the fair value calculated for our stock based awards
could change significantly. Higher volatility would result in an increase to stock-based compensation expense determined at the date of grant.

Expected dividend yield. We have not paid, nor do we currently intend to pay dividends on our common stock. In addition, our existing
credit facilities preclude us from paying cash dividends.

Risk-free interest rate. The risk-free interest rate is based on
the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the stock-based awards expected term.

Forfeiture rate. We estimate the forfeiture rate of our stock-based awards based on an analysis of our actual forfeitures, analysis of employee turnover and other factors. The impact
from a forfeiture rate adjustment would be recognized in full in the period in which the forfeiture rate changes and, if the actual number of future forfeitures differs from our prior estimates, we may be required to record adjustments to
stock-based compensation expense in future periods.

Fair value of common stock. The fair value of the shares of common
stock underlying the stock-based awards we grant has historically been the responsibility of and determined by our board of directors in the absence of a public trading market for our common stock. Our board of directors estimates the fair value of
our common stock for purposes of granting options and for determining stock-based compensation expense at each grant date after consideration of all available information including:

the status of our development, product introduction and sales efforts;



revenue growth;



industry information such as market growth and volume and macroeconomic events; and



additional objective and subjective factors relating to our business.

Determining the fair value of our common stock requires complex and subjective judgment. To assist our board of directors in setting the exercise price of our stock options at the fair market value of our common
stock on the applicable grant date, we obtained quarterly independent valuations performed by unrelated third-party specialists in a manner consistent with the American Institute of Certified Public Accountants Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation. Management and our board of directors have assumed full responsibility for the determination of the values by our independent appraisers. Our determination of the exercise price
and the fair market value of the underlying common stock for our option grants on or between the respective valuation dates are discussed further below.

In valuing our common stock, we first estimated the enterprise value of our business using the income approach. The income approach estimates the present value of
future estimated cash flows based upon forecasted revenue and costs. These future cash flows are discounted to their present values using highly subjective assumptions, such as a discount rate derived from an analysis of the cost of capital of
comparable publicly traded companies in our industry or similar lines of business as of each valuation date and are adjusted to reflect the risks inherent in our cash flows. To validate our estimated enterprise value under the income approach, we
also considered the market approach using both the public company market multiple method and the similar transaction method. The market approach estimates the fair value of a company by applying market multiples of guideline publicly traded
companies in our industry or similar lines of business which are based on key metrics implied by the enterprise values or acquisition values of these companies.

The enterprise value was then allocated to each of class of stock using either the option pricing method (OPM) or the probability weighted expected return method (PWERM) as additional information and certainty
developed regarding possible discrete events, including an IPO.

The OPM treats common stock and convertible preferred stock as call options on an
enterprise value, with exercise prices based on the liquidation preference of the preferred stock. Assuming the enterprise has funds available to make a liquidation preference meaningful and collectible by the stockholders, the common stock has
value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of a liquidity event, such as a merger, sale or IPO. The common stock is modeled as a call option with a claim on the
enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM uses the Black-Scholes option pricing model to price the call option. The OPM is appropriate to use when the range of possible
future outcomes is difficult to predict and thus creates highly speculative forecasts.

PWERM involves a forward-looking analysis of the possible future
outcomes of the enterprise. This method is particularly useful when discrete future outcomes can be predicted at a high confidence level with a probability distribution. Discrete future outcomes considered under the PWERM include non-IPO market
based outcomes, as well as an IPO. Determining the fair value of the enterprise using the PWERM requires us to estimate assumptions for both the probability of IPO and non-IPO outcomes, as well as the values we expect those outcomes could yield. We
apply significant judgment in estimating

these assumptions, primarily based upon the enterprise value we determine using the income method, our knowledge of the business and our reasonable expectations of discrete outcomes occurring. In
the non-IPO outcomes, a large portion of the enterprise value is allocated to the preferred stock to give effect to their higher aggregate liquidation preferences. In the IPO scenario, due to the automatic conversion of all shares of common stock
immediately prior to the closing of an IPO, the enterprise value is allocated pro rata among the shares of convertible preferred and each series of preferred stock, which causes the common stock to have a higher relative value per share.

Over time, as certainty developed regarding possible discrete events, including an IPO, we transitioned the methodology we used to allocate our enterprise value
from OPM to PWERM. We used the OPM through September 30, 2010, the OPM as validated by the PWERM on December 31, 2010 and the PWERM alone since January 1, 2011.

The following table provides some key assumptions utilized in our board of directors valuations at each respective grant date:

Grant date

Derived commonstock value

Expectedliquidity timing

Discount rate

Remain privatediscount rate forlack of marketability

11/04/2010

$

0.11

1 year

25

%

12.5

%

12/07/2010

0.11

1 year

25

12.5

01/13/2011

0.17

1 year

19

12.5

03/03/2011

0.17

1 year

19

12.5

04/06/2011

0.31

1.25 to 2.50 years

15

15

05/24/2011

0.31

1.25 to 2.50 years

15

15

06/29/2011

0.31

1.25 to 2.50 years

15

15

A brief narrative of the specific factors considered by our board of directors in determining the grant date fair value of our
common stock, of the date of each grant since November 1, 2010, is set forth below.

November and December 2010. For stock
option grants in November and December 2010, our board of directors determined the fair market value of our common stock to be $0.11 per share. This fair market value was based on a number of factors, including our achievement of profitability in
the three months ended September 30, 2010, our election of a new member to our board of directors in September 2010 and our introduction of a new product in October 2010. Our board of directors also considered the September 30, 2010
contemporaneous third-party valuation and determined that the fair market value of our common stock on each grant date was $0.11 per share.

We
determined our enterprise value using an income approach. In applying the OPM to the enterprise value during this period, the expected time to a liquidity event of one year was based on a reasonable time frame for us to achieve significant
milestones in our business strategy and experience a liquidity event based on market and business conditions prevailing at that time. The volatility of 40% was based on the median volatility over the expected time to a liquidity event for a select
group of guideline publicly traded companies. The risk-free interest rate of 0.26% was based on the yield on a U.S. Treasury bond corresponding to the expected time to a liquidity event. Due to a lack of a public market for our common stock, a
discount of 12.5% was applied based upon a protective put analysis using the same assumptions for the term, volatility and risk-free rate.

January
and March 2011. For stock option grants in January and March 2011, our board of directors determined the fair market value of our common stock to be $0.17 per share. This fair market value was based on a number of factors,
including the new product announcement of our earSmart eS310,

the first phase handset roll-out with AT&T of mobile devices incorporating these processors, our hiring of our Vice President of Business Development and our consideration of a proposed
schedule for an IPO for late 2011 or early 2012. Our board of directors also considered the December 31, 2010 contemporaneous third-party valuation and determined that the fair market value of our common stock on each date was $0.17 per share.

We determined the enterprise value using an income approach. In applying the OPM to the enterprise value during this period, the expected time to a
liquidity event of one year was based on a reasonable time frame for us to achieve significant milestones in our business strategy and experience a liquidity event based on market and business conditions prevailing at that time. The volatility of
40% was based on the median volatility over the expected time to a liquidity event for the group of guideline publicly traded companies. The risk-free interest rate of 0.27% was based on the yield on a U.S. Treasury bond corresponding to the
expected time to a liquidity event. Due to a lack of a public market for our common stock, a discount of 12.5% was based upon a protective put analysis using the same assumptions for the term, volatility and risk-free rate.

To confirm the valuation of our common stock determined using the OPM, we also performed a contemporaneous valuation based upon the PWERM as of December 31, 2010.
Using the PWERM, we estimated the value of our common stock to be $0.17 per share. The PWERM allocation used a risk adjusted discount rate of 19% based upon an adjusted capital asset pricing model and a lack of marketability discount of 12.5% in the
remaining a private company scenario. The expected outcomes were weighted as follows: 35% probability of an IPO in 0.75 years likely resulting in proceeds of $140 million; 10% probability of an IPO in 1.25 years likely resulting in
total proceeds of $200 million; and 5% probability of an IPO in 2.0 years likely resulting in total proceeds of $400 million. Similarly, we believed that a sale or acquisition of our company would be the second most probable scenario.
We believed that there was a 30% chance that we would be sold or acquired in 1.0 year likely generating total proceeds of $100 million and a 20% chance that we would be sold or acquired in 2.0 years generating total proceeds of
$50 million. In the $50 million acquisition scenario, the equity proceeds would be allocated among the preferred stockholders based on liquidation preference seniority and no value would be allocated to the common stockholders.

April, May and June 2011. For stock option grants in April, May and June 2011, our board of directors determined the fair market value
of our common stock to be $0.31 per share. This fair market value was based on a number of factors, including our release of a new advanced voice and audio processor, the hiring of additional key employees and the addition of a new member to our
board of directors. The valuation also took into account our continued progress towards becoming a public company and the expected date for an IPO organizational meeting late in the summer of 2011. Our board of directors also considered the
March 31, 2011 contemporaneous third-party valuation and determined that the fair market value of our common stock on each grant date was $0.31 per share.

As a result, the PWERM approach valuation as of March 31, 2011 increased to $0.31 per share. Our board of directors believed that the acceleration in the revenue growth rate in the second half of 2010 and our
improved outlook was consistent with the growth trend in the fair market value per share during this period.

The March 31, 2011 contemporaneous
valuation was based on the PWERM. The PWERM allocation used a risk adjusted discount rate of 15% based upon an adjusted capital asset pricing model and a lack of marketability discount of 15% in the remaining a private company scenario. The expected
outcomes were weighted as follows: 40% probability of an IPO in 1.25 years likely resulting in proceeds of $250 million, a 15% probability of an IPO in 1.583 years likely resulting in total proceeds of

$500 million and a 5% probability of an IPO in 2.25 years, likely resulting in total proceeds of $800 million. Similarly, we believed that a sale or acquisition of our company
would be the second most probable scenario. We believed that there was a 30% chance that our company would be sold or acquired in 1.75 years likely generating total proceeds of $150 million and a 10% chance that our company would be sold
or acquired in 2.25 years generating total proceeds of $50 million. In the $50 million acquisition scenario, the equity proceeds would be allocated among the preferred stockholders based on liquidation preference seniority and no
value would be allocated to the common stockholders.

Upon completion of this offering, our common stock will be publicly traded and will therefore be
subject to potential significant fluctuations in the market price. Such fluctuations, if they occur, could impact the volatility used in the fair value calculations which could also impact our future stock-based compensation, as increased volatility
would increase the fair value of the related awards granted in future periods. In addition, increases and decreases in market price of our common stock will also increase and decrease the fair value of our stock-based awards granted in future
periods.

Convertible preferred stock warrants

We classify freestanding warrants to purchase shares of our convertible preferred stock as liabilities on our balance sheets and carry them at fair value because the warrants obligate us to transfer assets to the
holders under certain circumstances (e.g., upon a change in control) at some point in the future. The warrants are subject to remeasurement at each balance sheet date and we recognize any change in fair value as a component of other income
(expense), net in our statements of operations. We estimated the fair value of these warrants at issuance and at the respective balance sheet dates using the Black-Scholes option pricing model. We recorded amounts of $(382,000), $58,000, $88,000 and
$556,000 to other income (expense), net for 2008, 2009 and 2010 and the nine months ended September 30, 2011, respectively, to reflect an increase in the fair value of these warrants.

We will continue to record adjustments to the fair value of the warrants until they are exercised, converted into warrants to purchase common stock, or expire. Upon the closing of the offering to which this
prospectus relates, all outstanding warrants to purchase shares of our convertible preferred stock will become warrants to purchase shares of our common stock and, as a result, will no longer be remeasured at each balance sheet date. The then
current aggregate fair value of these warrants at the time of the offering will be reclassified from liabilities to additional paid in capital, a component of stockholders equity (deficit).

The following table sets forth our historical operating results for 2008, 2009, 2010 and the nine months ended September 30, 2010 and 2011, respectively. The period to period comparison of our financial
results is not necessarily indicative of the financial results we may achieve in future periods and the results for the nine months ended September 30, 2011 are not necessarily indicative of financial results to be expected for the full year or
any other future period.

Year ended December 31,

Nine months endedSeptember 30,

2008

2009

2010

2010

2011

(unaudited)

(in thousands)

Revenue

$

2,454

$

5,749

$

47,920

$

28,165

$

79,716

Cost of revenue

1,729

5,355

19,314

12,061

35,745

Gross profit

725

394

28,606

16,104

43,971

Operating expenses:

Research and development

9,147

8,969

11,445

8,266

14,605

Selling, general and administrative

6,651

8,058

12,217

8,195

14,870

Total operating expenses

15,798

17,027

23,662

16,461

29,475

Income (loss) from operations

(15,073

)

(16,633

)

4,944

(357

)

14,496

Interest income (expense), net

218

11

(17

)

(17

)

(5

)

Other income (expense), net

367

(136

)

(139

)

12

(557

)

Net income (loss)

$

(14,488

)

$

(16,758

)

$

4,788

$

(362

)

$

13,934

The following table sets forth our historical operating results for 2008, 2009, 2010 and the nine months ended September 30,
2010 and 2011, respectively, as a percentage of revenue:

Revenue increased $51.5 million, or
183%, from $28.2 million for the nine months ended September 30, 2010 to $79.7 million for the nine months ended September 30, 2011. The increase was due primarily to Foxconns purchase of our voice and audio processors, as
well as continued sales growth to other OEMs. Substantially all of our revenue during these periods was generated from the sale of our products to CMs and OEMs with their primary manufacturing operations and distributors in Asia.

In the nine months ended September 30, 2010 and 2011, Foxconn represented 79% and 70% and Samsung represented 8% and 17% of our revenue, respectively. No other
OEM, CM or distributor represented more than 10% of our revenue in either period. Aggregate sales to distributors accounted for less than 10% of our total revenue in each of the nine months ended September 30, 2010 and 2011.

Cost of revenue and gross margin

Cost of revenue
increased $23.7 million, or 196%, from $12.1 million in the nine months ended September 30, 2010 to $35.7 million in the nine months ended September 30, 2011. The increase was primarily due to the increased volume of our
first generation of processors, the A1026, the A1028 and a custom processor for Apple, which achieved volume production in the first half of 2010. Gross margin was 57% and 55% in the nine months ended September 30, 2010 and 2011, respectively.
The decrease in gross margin was due to a higher proportion of sales of lower margin voice and audio processors in the nine months ended September 30, 2011 as we endeavored to diversify our revenue streams.

Operating expenses

Research and
development. Research and development expenses increased $6.3 million, or 77%, from $8.3 million in the nine months ended September 30, 2010 to $14.6 million in the nine months ended September 30,
2011. The increase was primarily due to additions in headcount, resulting in a $3.7 million increase in salaries, employee benefits and stock-based compensation expense. Costs of consulting and outside services, including offshore providers of
product development services, increased $1.3 million as a result of development projects related to our second generation of voice and audio processors and other new products. This was offset by a decrease in mask expenses for the manufacture
of our voice and audio processors, which decreased to $338,000 from $1.5 million. Costs were also offset by $888,000 and $525,000 in the nine months ended September 30, 2010 and 2011, respectively, for cash received for the performance of
nonrecurring engineering work.

Selling, general and administrative. Selling, general and administrative expenses increased
$6.7 million, or 82%, from $8.2 million in the nine months ended September 30, 2010 to $14.9 million in the nine months ended September 30, 2011. The increase was primarily due to additions in headcount, resulting in a
$4.2 million increase in salaries, employee benefits and stock-based compensation expense and a $1.1 million increase in audit and legal fees, which was primarily related to our ongoing preparations to become a public company.

Other income (expense), net

Other income (expense),
net decreased $569,000 from income of $12,000 in the nine months ended September 30, 2010 to expense of $557,000 in the nine months ended September 30, 2011. The decrease was primarily due to mark-to-market adjustments in the fair value of
our outstanding preferred stock warrants. The increase in the fair value of the warrants due to an improved business outlook was recognized as an expense in other income (expense), net.

Revenue increased $42.2 million, or
740%, from $5.7 million in 2009 to $47.9 million in 2010. The increase was due primarily to Foxconns purchase of our processors for a single OEMs mobile phone that launched in 2010, as well as continued launches of mobile
devices by other customers, including Samsung. Substantially all of our revenue in 2009 and 2010 was generated by sales to CMs and OEMs that have their primary manufacturing operations and distributors in Asia.

Foxconn accounted for 0% and 81% of our total revenue in 2009 and 2010, respectively. Sales of our voice and audio processors to Foxconn commenced in production
volumes in the second quarter of 2010 and rose throughout the remainder of 2010. In 2009, HTC, LG and Uniquest, a distributor for Samsung, accounted for 36%, 45% and 15% of our total revenue, respectively. No other OEM, CM or distributor represented
more than 10% of our total revenue in either period. Aggregate sales to distributors accounted for less than 10% of our total revenue in each of 2009 and 2010.

Cost of revenue and gross margin

Total cost of revenue increased $13.9 million, or 257%, from
$5.4 million in 2009 to $19.3 million in 2010. The increase was due to a higher volume of sales. Gross margin rose from 7% in 2009 to 60% in 2010, due to a favorable sales mix of our first generation processors, which achieved volume
production in the first half of 2010. In 2009, we wrote down $1.3 million of inventory that exceeded the amount of inventory that we needed to retain to satisfy our then-current forecasts of the future demand for our processors.

Operating expenses

Research and
development. Research and development expenses increased $2.4 million, or 28%, from $9.0 million in 2009 to $11.4 million in 2010. The increase was primarily due to additions in headcount, resulting in a $2.5 million
increase in salaries, employee benefits and stock-based compensation expense. Consulting and outside services, including offshore providers of product development services, increased $800,000 in 2010. Increases in research and development expenses
were partially offset by a reduction in the cost of mask sets and related costs from $3.7 million in 2009 to $2.5 million in 2010 due to the timing and number of new processor introductions. Costs were also offset by $1.5 million and $1.8
million in 2009 and 2010, respectively, for cash received for the performance of nonrecurring engineering work.

Selling, general and
administrative. Selling, general and administrative expenses increased $4.1 million, or 51%, from $8.1 million in 2009 to $12.2 million in 2010. The increase was primarily due to additions in headcount, resulting in a
$2.0 million increase in salaries, employee benefits, stock-based compensation and recruiting expenses. Legal costs associated with our intellectual property protection program increased by $500,000. We also incurred an additional $260,000
associated with increased marketing activities.

Comparison of years ended December 31, 2008 and 2009

Revenue

Revenue increased $3.2 million, or 128%,
from $2.5 million in 2008 to $5.7 million in 2009. The increase was due to increased sales of our first generation processors. Substantially all of our sales in 2008 and 2009 were to CMs and OEMs that had their primary manufacturing
operations and distributors in Asia.

HTC accounted for 36% of our total revenue in 2009 and LG accounted for 18% and 45% of our total revenue in 2008 and
2009, respectively. Sales through Uniquest, a distributor for Samsung, accounted for 15% of our total revenue in 2009. Pantech accounted for 20% of our total revenue in 2008. Sales through Midoriya, a distributor for Sharp, accounted for 60% of our
total revenue in 2008. No other OEM, CM or distributor accounted for 10% or more of our total revenue in either period.

Cost of revenue and gross
margin

Cost of revenue increased $3.7 million, or 218%, from $1.7 million in 2008 to $5.4 million in 2009. The increase was due
to the higher sales volumes as a result of the adoption of our technology by several OEMs and the write down of $1.3 million of excess inventory. Gross margin fell from 30% in 2008 to 7% in 2009, which reflected the impact of the write down of
inventory that exceeded the amount we needed to retain to satisfy our then-current forecasts of the future demand for our processors.

Operating
expenses

Research and development. Total research and development expenses were largely unchanged from
$9.1 million in 2008 compared to $9.0 million in 2009. Although total research and development expenses were largely unchanged, a decrease in headcount and related salaries, employee benefits and stock-based compensation in 2009 was offset
by an increase in tape out and related expenses in 2009. Research and development expenses were partially offset by $435,000 and $1.5 million during 2008 and 2009, respectively, for cash received for the performance of nonrecurring engineering work.

Selling, general and administrative. Selling, general and administrative expenses increased $1.4 million, from
$6.7 million in 2008 to $8.1 million in 2009. The increase was primarily due to an increase in headcount, resulting in a $1.1 million increase in salaries, employee benefits, stock-based compensation expenses and recruiting costs.

Other income (expense), net

Other income
(expense), net decreased $503,000 from income of $367,000 in 2008 to expense of $136,000 in 2009. The decrease was primarily due to mark-to-market adjustments in the fair value of our outstanding preferred stock warrants. The increase in the fair
value of the warrants due to an improved business outlook was recognized as an expense in other income (expense).

The following table sets forth our unaudited statements of operations data for each of the last seven quarters. The unaudited quarterly data was prepared on the same basis as the audited financial statements
included elsewhere in this prospectus. You should read this information together with our financial statements and related notes included elsewhere in this prospectus. The results of the quarterly historical periods presented below are not
necessarily indicative of the results of operations for a full year or any future periods.

Three months ended

Mar. 31,2010

June 30,2010

Sept. 30,2010

Dec. 31,2010

Mar. 31,2011

June 30,2011

Sept. 30,2011

(in thousands, unaudited)

Revenue

$

1,674

$

7,314

$

19,177

$

19,755

$

28,540

$

24,870

$

26,306

Cost of revenue

1,259

3,585

7,217

7,253

10,414

11,533

13,798

Gross profit

415

3,729

11,960

12,502

18,126

13,337

12,508

Operating expenses:

Research and development

1,915

2,271

4,080

3,179

5,034

5,183

4,388

Selling, general and administrative

2,268

2,769

3,158

4,022

3,969

5,081

5,820

Total operating expenses

4,183

5,040

7,238

7,201

9,003

10,264

10,208

Income (loss) from operations

(3,768

)

(1,311

)

4,722

5,301

9,123

3,073

2,300

Interest income (expense), net

(12

)

(3

)

(2

)



(3

)

(2

)



Other income (expense), net

20

28

(36

)

(151

)

(337

)

(321

)

101

Net income (loss)

$

(3,760

)

$

(1,286

)

$

4,684

$

5,150

$

8,783

$

2,750

$

2,401

The following sets forth notable fluctuations in our quarterly results of operations:

Our revenue increased to $7.3 million in the three months ended June 30, 2010 and was mostly attributed to our sale of processors to Foxconn. Revenue
attributable to Foxconn during this quarter was $5.4 million. For the three months ended September 30, 2010, December 31, 2010 and March 31, 2011, sales to Foxconn increased to $16.3 million, $17.2 million and
$22.0 million, respectively, as a result of user acceptance of mobile phones launched commercially in mid-2010. For the three months ended June 30, 2011, total revenue decreased $3.7 million, or 13%, from the previous quarter
primarily due to a decrease in sales to Foxconn partially offset by an increase in sales to Samsung.

Our gross profits improved in 2010 primarily due to
a favorable sales mix of higher margin voice and audio processors and cost efficiencies as a result of higher unit volumes. As we endeavored to diversify our revenues in 2011, gross profits decreased due to sales of lower margin voice and audio
processors.

In each of the quarters of 2010, we added to our levels of staffing company-wide, and, in doing so, increased expenses associated with
salaries and bonuses, employee benefits and stock-based compensation. We also received cost reimbursements, periodically, for performing nonrecurring engineering services for a single OEM, which reduced our total research and development expenses.
Selling, general and administrative costs for corporate legal, intellectual property legal, audit and tax services also increased due to the growth of our business.

During the first three quarters of 2011, we continued to add to our levels of staffing through all departments, thereby increasing salaries and bonuses, employee benefits and stock-based compensation expenses.
Research and development expenses during the three months ended March 31, 2011 increased $1.9 million over the previous quarter and included a reduction in research and development expense during the previous quarter from the effect of a
nonrecurring engineering service fee. Our selling, general and administrative expenses increased $1.1 million during the three months ended June 30, 2011 and were

mostly a result of an increase in audit and legal fees, which were primarily related to our ongoing preparations to become a public company. Research and development expenses during the three
months ended September 30, 2011 decreased $795,000 over the previous quarter due in part to receiving a nonrecurring engineering service fee.

Liquidity and capital resources

Since our inception, we
have incurred significant losses, and, as of September 30, 2011, we had an accumulated deficit of $36.5 million. We have funded our operations primarily with proceeds from the sale of an aggregate of $74.3 million of convertible
preferred stock, cash flows from operations and borrowings under our credit facilities. As of September 30, 2011, we had cash and cash equivalents of $23.3 million, $137,000 of capital lease obligations and $3.6 million of operating
lease obligations.

As of September 30, 2011, we also had access to a $10.0 million revolving line of credit, with available funds based on
eligible accounts receivable and customer purchase orders. As of September 30, 2011, we had no outstanding borrowings under this line of credit. Our master loan agreement for our revolving line of credit and equipment loan contains covenants.

We believe that our existing sources of liquidity will satisfy our working capital and capital requirements for at least the next 12 months. We
cannot assure you that we will be successful in executing our business plan, maintaining and growing our existing customer base or achieving profitability. Failure to generate sufficient revenue or control costs may require us to raise additional
capital through equity or debt financing. Such additional financing may not be available on terms acceptable to us, or at all, and could require us to modify, delay or abandon some of our planned future expansion or expenditures or reduce some of
our ongoing operating costs. If we are unable to obtain additional financing, it could have a material adverse effect on our business, financial condition, operating results and cash flows and ability to achieve our intended business objectives. If
we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company and any
new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

Our cash flows for 2008, 2009,
2010 and the nine months ended September 30, 2010 and 2011 were as follows:

We generated cash from operations in each of the last four quarters. Prior to the three months ended December 31, 2010, our operating activities used net cash as we expanded our business and built our
infrastructure. Our operating cash flows primarily depend on the timing and amount of cash receipts from sales of our products and royalty payments, inventory purchases and our payment of operating expenses. Net cash used in operating activities for
the periods presented consisted of net income or losses adjusted for certain noncash items and changes in working capital. Within changes in working capital, changes in accounts receivable, inventory and accounts payable generally account for the
largest adjustments, as we typically use more cash to fund accounts receivable and build inventory as our business grows. Increases in accounts payable typically provides more cash as we do more business with our contract foundries and other third
parties, depending on the timing of payments.

Cash flows from investing activities

Our investing activities consist primarily of purchases and sales of short-term investments, purchases of property and equipment and costs incurred to register and
maintain our intellectual property, such as patents and trademarks. We expect to continue to make significant capital expenditures to support our expanding operations and incur costs to protect our investment in our developed technology and
intellectual property.

Cash flows from financing activities

To date, we have financed our operations primarily with proceeds from the sale of our convertible preferred stock and borrowings under our credit facilities.

Comparison of nine months ended September 30, 2010 and 2011

Cash flows from operating activities. For the nine months ended September 30, 2011, net cash provided by operating activities was $12.4 million, as compared to net cash used
in operating activities of $12.5 million for the nine months ended September 30, 2010. The most significant component of this change was Foxconns commercial scale production of mobile phones with our processor, as well as continued
revenue growth from other OEMs, yielding net income of $13.9 million for the nine months ended September 30, 2011 compared to a net loss of $362,000 for the nine months ended September 30, 2010. In addition, a decrease in accounts
receivable due to the timing of payments contributed to the increase in cash from operating activities. To a much lesser extent, other changes in working capital, mostly due to the timing of when liabilities were incurred and payments were received,
partially offset the benefit of the change to net income for the nine months ended September 30, 2011, from the net loss for the nine months ended September 30, 2010.

Cash flows from investing activities. For the nine months ended September 30, 2011, net cash used in investing activities was $1.3 million, as compared to $231,000 for the
nine months ended September 30, 2010, due primarily to purchases of property and equipment to support the growth in our business.

Cash flows
from financing activities. For the nine months ended September 30, 2011, net cash provided by financing activities was $144,000 as compared to $14.4 million for the nine months ended September 30, 2010. The
decrease was due primarily to our receipt of $15.1 million of proceeds from the sale of our Series E preferred stock in February and March 2010.

Cash flows from operating activities. For 2010, net cash used in operating activities fell to $8.3 million from
$14.9 million for 2009. The most significant component of this change was Foxconns commercial scale production of mobile phones with our processor in mid-2010. This resulted in net income of $4.8 million in 2010 compared to a net
loss of $16.8 million in 2009. This net income benefit was partially offset by an increase in accounts receivable and an increase in inventories to support our increased sales volumes.

Cash flows from investing activities. For 2010, net cash used in investing activities was $560,000, as compared to net cash provided by investing activities of $726,000 for 2009. The
change was due primarily to higher purchases of property and equipment in 2010 to support our growth, partially offset by proceeds received upon maturity of our money market and certificate of deposit investments.

Cash flows from financing activities. For 2010, net cash provided by financing activities fell to $14.5 million from
$16.2 million for 2009. In 2010, we completed the sale of our Series E preferred stock and repaid the $800,000 balance under our revolving line of credit. In 2009, we completed the sale of our Series D preferred stock and received
$411,000 in proceeds from our equipment term loan and $800,000 under our revolving line of credit.

Comparison of years ended December 31, 2008
and 2009

Cash flows from operating activities. For 2009, net cash used in operating activities increased slightly to
$14.9 million from $14.6 million for 2008. This modest change was primarily due to the increase in our net loss to $16.8 million in 2009 compared to our net loss of $14.5 million in 2008, which was partially offset by a change in
the fair value of our convertible preferred stock warrants and changes in working capital.

Cash flows from investing
activities. For 2009, our cash provided by investing activities fell to $726,000 from $820,000 for 2008. We purchased $10.8 million of available-for-sale securities in 2008 and received $13.0 million upon
maturities of available-for-sale securities in 2008. In 2008, we placed $768,000 in restricted cash to support our facilities lease and our corporate credit card agreements.

Cash flows from financing activities. For 2009, net cash provided by financing activities increased to $16.2 million from $14.8 million for 2008. This increase was due
primarily to $411,000 in proceeds received on our equipment term loan and $800,000 from our revolving line of credit in 2009. Additionally, we also completed the sale of our Series D preferred stock in 2009 and the sale of our Series C
preferred stock in 2008.

Off balance sheet arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which
would have been established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purpose.

The following table summarizes our contractual obligations and commitments for principal and interest payments due on our capital lease facility and operating lease payments as of December 31, 2010:

Payments due by period

Total

Less than1 year

1 to 3years

3 to 5years

More than5 years

(in thousands)

Capital lease obligations

$

240

$

137

$

103

$



$



Operating lease obligations

3,320

1,190

2,130





Components purchase obligations(1)

9,868

9,868







$

13,428

$

11,195

$

2,233

$



$



(1)

Purchase obligations represent outstanding purchase orders that we have placed with our suppliers as of December 31, 2010. The lead time for delivery is long, typically 12
to 14 weeks, and suppliers must prepare unique materials for us at the beginning of the fabrication process. Accordingly, we are precluded from cancelling our orders once placed and the production process has begun.

As of December 31, 2010, we had no liability for uncertain tax positions.

Our operating lease commitments primarily relate to the lease of our corporate headquarters in Mountain View, California and, to a lesser extent, our offices in Scotts Valley, California, Lafayette, Colorado and
Seoul, South Korea. Other than our Mountain View, California lease, our leases are for a remaining period of less than 12 months.

We are exposed to market risks in the ordinary course of our business. These risks primarily include
foreign exchange rate and interest rate sensitivities as follows:

Foreign currency risk

We sell our products to CMs and OEMs with their primary manufacturing operations and distributors in Asia. All sales of our processors and the license of our
processor IP are denominated in U.S. dollars. We incur a small portion of our expenses in currencies other than the U.S. dollar. The expenses we incur in currencies other than U.S. dollars affect gross profit, selling, general and administrative
expenses and income taxes and are primarily incurred in the South Korean won.

As of December 31, 2010, the functional currency of our Korean branch
was the U.S. dollar. Transaction gains and losses resulting from transactions denominated in currencies other than the respective functional currencies are included in other income (expense), net for the periods presented. The amounts of
transaction gains and losses were not material in any of the periods presented.

Given that the operating expenses that we incur in currencies other than
U.S. dollars have not been a significant percentage of our revenue, we do not believe that our foreign currency exchange rate fluctuation risk is significant. Consequently, we do not believe that a hypothetical 10% change in foreign currency
exchange rates would have a significant effect on our future net income or cash flows as of December 31, 2010.

We have not hedged exposures denominated in foreign currencies or used any other derivative financial instruments.
Although we transact the overwhelming majority of our business in U.S. dollars, future fluctuations in the value of the U.S. dollar may affect the competitiveness of our products and thus may impact our results of operations and cash flows.

Interest rate sensitivity

We had cash
and cash equivalents of $12.1 million as of December 31, 2010. Our cash and cash equivalents are held primarily in cash deposits and money market funds. We hold our cash and cash equivalents for working capital purposes. Due to the
short-term nature of these instruments, we believe that we do not have material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates will reduce future interest
income. During 2010, a 10% appreciation or depreciation in overall interest rates would not have had a material impact on our interest income.

Recent accounting pronouncements

In October 2009, the
Financial Accounting Standards Board (FASB) revised the authoritative guidance for revenue recognition for arrangements with multiple deliverables. The new guidance modifies the requirements for determining whether a deliverable can be treated as a
separate unit of accounting by removing the criteria that verifiable and objective evidence of fair value exists for the undelivered elements. In allocating transaction consideration among the deliverables, the guidance also introduced the concept
of using managements best estimate of a stand-alone selling price as an alternate basis for allocation. The guidance is effective for fiscal years beginning on or after June 15, 2010 and we adopted this guidance in the first quarter of
2011. The adoption of this guidance has not had any material impact on our financial position, results of operations or cash flows.

In October 2009, the
FASB issued authoritative guidance addressing certain revenue arrangements that include software elements. This guidance states that tangible products with hardware and software components that work together to deliver the product functionality are
considered nonsoftware products and the accounting guidance under the revenue arrangements with multiple deliverables is to be followed. We adopted this guidance in the first quarter of 2011. The adoption of this guidance has not had any material
impact on our financial position, results of operations or cash flows.

In April 2010, the FASB issued authoritative guidance for applying the milestone
method of revenue recognition for research and development transactions. The guidance also provides a definition for milestones. Under the guidance, an entity can recognize consideration that is contingent upon achievement of a milestone as revenue
only if the milestone is considered substantive. We adopted this guidance in the first quarter of 2011. The adoption of this guidance has not had any material impact on our financial position, results of operations or cash flows.

In December 2010, the FASB issued guidance on the disclosure of supplementary pro forma information for business combinations. This update requires public entities
to disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred at the beginning of the comparable prior annual reporting period only. We will apply this guidance to any
future acquisitions and adopted this standard as of January 1, 2011. The adoption of this guidance has not had a material impact on our financial position, results of operations or cash flows.

In May 2011, the FASB amended its guidance related to fair value measurements to provide a consistent definition of fair value and ensure that the fair value
measurement and disclosure

requirements are similar between GAAP and International Financial Reporting Standards. The amendments change the wording used to describe many of the requirements in GAAP for measuring fair value
and for disclosing information about fair value measurements. For many of the requirements, the updated guidance should not result in a change in the application of previous fair value measurement guidance. The guidance is effective for us
prospectively beginning in the first quarter of 2012. We do not expect that the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

In June 2011, the FASB issued guidance related to the presentation of comprehensive income. This update gives an entity the option to present the total of
comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for us
beginning in the first quarter of 2012 and should be applied retrospectively. Other than requiring additional disclosures, we do not expect that the adoption of this guidance will have a material impact on our financial position, results of
operations or cash flows.

We are the leading provider of intelligent voice and audio solutions that improve voice
quality and the user experience in mobile devices. We collaborate with leading auditory neuroscientists to understand the human auditory system and have developed purpose-built processors that combine science and technology to function like human
hearing. Our low power, hardware-accelerated DSPs and associated algorithms substantially improve sound quality and suppress noise in mobile devices. As the primary driver of the mobile device market, the mobile phone continues to play an
increasingly prominent role in peoples lives. Voice communication is a primary function of mobile phones, and we expect voice to increasingly complement touch as a core user interface, heightening the importance of voice and audio quality in
mobile devices.

The human auditory system is remarkable for its ability to isolate individual sources within a complex sound mixture. We have
incorporated this capability into an intelligent platform by employing CASA, a scientific discipline dedicated to mapping the sound separation functions in human hearing, into a computational framework. This approach enables our products to
intelligently characterize, group and isolate sounds to improve sound quality while suppressing noise. We believe that our approach addresses the challenge of providing clear and consistent voice and audio quality more effectively than other
available solutions. We also believe that our highly scalable platform will enable us to create and drive differentiated user experiences, such as robust speech recognition and high-quality audio for mobile video communication.

Our platform consists of our proprietary, purpose-built DSPs, analog and mixed signal circuits and algorithms for voice isolation and noise suppression. We also
provide our proprietary AuViD graphical design tools to help OEMs design in and tune our products in their efforts to bring mobile devices with the best voice and audio quality to market rapidly. Our technologies and tools are underpinned by our
significant intellectual property, resulting in a strong foundation from which to extend the value of our platform through continued innovation and integration of adjacent voice and audio functionality.

We were founded in 2000 and initially targeted the rapidly growing mobile device market, including mobile phones, media tablets and mobile PCs. We began production
shipments in 2008 and had sold over 135 million processors to our OEM customers as of December 31, 2011. In addition to the mobile device market, we believe that our voice and audio technology is also applicable to a broad range of other
market segments, including automobile infotainment systems, digital cameras, digital televisions, headsets and set top boxes.

We are headquartered in
Mountain View, California, reincorporated in Delaware in June 2011 and had 189 employees as of December 31, 2011. We outsource the manufacture of our voice and audio processors to independent foundries and use third parties for assembly,
packaging, test and logistics. We had total revenue of $5.7 million, $47.9 million and $79.7 million for 2009, 2010 and the nine months ended September 30, 2011, respectively. We had net income (loss) of $(16.8) million,
$4.8 million and $13.9 million for 2009, 2010 and the nine months ended September 30, 2011, respectively.

Industry overview

Mobile devices are ubiquitous today and play an increasingly prominent role in peoples lives. However, due to network and device limitations,
voice quality has not changed significantly since

the introduction of mobile phones. For example, the frequency range of sound has historically been constrained by narrowband, circuit switched networks, resulting in lower voice quality than in a
face-to-face conversation. In addition, mobile devices have been unable to adequately separate the users voice from background noise. As a result, users have had to tolerate noisy, poor quality voice communication. After years of mobile
network infrastructure investments in bandwidth and connectivity, MNOs are turning their attention to voice and audio quality as a way to improve user experience, satisfaction and loyalty.

The transition from narrowband to wideband communications has produced networks capable of carrying higher quality signals, and the sound quality delivered by these networks is poised for significant improvement.
Advanced voice and audio solutions will also enable mobile devices to improve sound quality and enhance the user experience. As users increasingly become aware of these network and device improvements, they are demanding improved voice quality in
the devices they depend upon, including smartphones, feature phones, media tablets and mobile PCs. In addition, new applications and functionality, such as voice as a user interface, will require improved voice and audio quality. We expect that OEMs
and MNOs will increasingly adopt advanced voice and audio solutions as they seek to differentiate future products and services.

IDC estimates that the
market for mobile devices, including smartphones, feature phones, media tablets and mobile PCs, will grow to 2.6 billion units by 2015. This market is undergoing rapid change, and IDC expects fast growing segments such as smartphones and media
tablets to have 2010 to 2015 unit CAGRs of 28% and 50%, respectively, driving growth and changing user expectations for mobile devices. Dedicated voice and audio processors are expected to expand rapidly as a new category not only in mobile devices,
but also in market segments such as automobile infotainment systems, desktop PCs, digital cameras, digital televisions, headsets and set top boxes. IDC estimates that voice and audio processor unit sales will grow from 63 million units in 2010
to over 1.6 billion units in 2015, representing a CAGR of 92%.

Sound quality is fundamental to the user experience in mobile communications. A variety of trends are driving demand for high-quality
voice and audio solutions in mobile devices, including:

Users expect more freedom in how and where they communicate. Users
increasingly want to make or take calls with their mobile devices in noisy environments, but they also want to hear and be heard clearly. Users want a consistent, high-quality voice and audio experience whether conducting a conference call from an
airport, video chatting in a cafe, calling a friend hands-free while driving or capturing and posting multimedia content to a social network page.

Users expect high-quality voice and audio in their mobile devices. As MNOs and OEMs promote new wideband
networks and more advanced mobile devices in their marketing campaigns, users are learning to expect and seek improved voice and audio quality from those networks and devices.

Increased functionality in mobile devices. OEMs are adding new features to mobile devices that were historically found only in stand-alone devices such as music players, video cameras,
navigation

devices, gaming devices and others. Substantial improvements in voice and audio quality improve the user experience for many of these functions. OEMs are making greater investments in voice and
audio quality for multifunction mobile devices.

Increased far-field interaction with mobile devices. An increasing number
of applications require far-field use cases, in which the microphone is held farther from the sound source than traditional handset use modes. A common far-field use case is speakerphone mode, which is typically used with applications such as Skype,
Facetime, hands-free calling and Google Voice Search. These and other applications require a combination of speech, touch and visual interaction where the mobile device is held away from the speaker. Far-field uses are more vulnerable to background
noise interference and poor voice quality given the speakers distance from the device.

Voice is becoming a preferred interface for mobile
devices. Voice communication is a fundamental form of human interaction and represents a natural interface for mobile devices. A common use of voice as a mobile device interface is in automobiles, where users are required
to comply with hands-free legislation. Similar to the evolution of touch as an interface, speech recognition is expected to be increasingly important, particularly as voice-enabled applications become more prevalent and viable.

Poor-quality audio impacts the HD video experience. As HD video content continues to become increasingly prevalent within broadband
and broadcast networks, we believe that a high-quality audio user experience will provide a point of substantial differentiation in the experience of consuming media content, and that robust real-time voice and audio processing will play an
important role in user satisfaction as HD video capture and playback on mobile devices becomes more common.

The voice and audio subsystem in a typical smartphone includes a baseband processor for modulation and transmission of voice and audio signals, an application processor for multimedia-based applications, audio
codecs to digitally encode and decode audio signals, as well as acoustic elements such as microphones and speakers. Some mobile devices only incorporate a single microphone as part of the audio subsystem, while more advanced mobile devices use two
microphone solutions to increase the amount of information available to improve the voice and audio performance of the device. The voice and audio subsystem also includes other analog circuits, such as data converters, amplifiers and mixers, each of
which has a specific function along the signal chain.

A greater
number of mobile devices are incorporating a new category of voice and audio processors with dedicated processing resources and specialized algorithms to improve user experience. The pace of innovation in voice and audio processing has recently
accelerated, with the adoption of two microphone nonstationary noise suppression solutions. We believe that new technology development and introduction will continue at a rapid pace for the foreseeable future, driven by demand for improved voice and
audio quality, with voice becoming a core user interface in mobile devices.

users to hear and be heard. New and existing far-field uses, such as video calling and speakerphone mode, make mobile communications even more susceptible to degradation by ambient noise. In
addition, new voice communication technologies such as Skype that use Internet Protocol-based communication offer a wider audio frequency range, but are inherently noisier than typical narrowband communications.

Isolating voice from background noise is very difficult. Removing background noise while preserving speech quality is challenging.
Nonstationary noise, such as voice or music, which constantly changes in both frequency and loudness, is particularly problematic. Nonstationary noise is highly distracting to a listener and is especially difficult to remove without affecting speech
quality, due in part to the similarity of such noise to speech itself. An effective solution should be able to remove all noise types, in almost all conditions, without harming speech quality.

A complete voice and audio solution cannot be provided without consistent voice isolation. For an improved mobile device user experience, it is necessary to provide high-quality echo
cancellation, equalization, receive channel enhancement and improved speaker output. In order to accomplish this, it is essential to have a detailed analysis of the sound sources and consistently isolate the voice or audio signal of interest for
focused and effective improvement across use cases and noise environments. For example, receive channel enhancement requires isolation of voice from noise in the far-end signal, as well as analysis of local noise sources.

Implementing high-quality voice and audio solutions on mobile devices creates additional challenges. Mobile devices are small, thereby
limiting any opportunity to spread out or use a large number of microphones to locate the desired voice. The small form factor of mobile devices also makes it difficult to physically separate speakers from microphones to prevent echo. There is
typically little or no flexibility to adapt the mobile device form factor to the acoustic needs of a voice processing solution. Cost constraints often compel OEMs to use low cost, commoditized microphones and speakers, which have significant
manufacturing variances that impair most multimicrophone solutions. Low power consumption requirements preclude the use of high-power integrated circuits or software. Finally, short design cycles further exacerbate these issues by limiting the
window of time to tune device performance for a devices individual acoustic and electronic characteristics.

All of these challenges impair basic
voice call quality and are magnified for emerging uses of voice and audio such as video communication, speech recognition and multimedia capture and playback, which depend on far-field use cases and/or wideband frequencies.

Traditional signal processing techniques are not scalable or adaptable to dynamic sound environments. Conventional approaches deployed
in baseband and other processors lack the sophistication to benefit from greater compute capabilities and are unable to mitigate nonstationary noise effectively. These techniques exhibit the following shortfalls:



Stationary noise suppressionremoves only small amounts of slowly changing noise, such as noise from a fan.



Beam-forminguses multiple microphones, relies on directional noise suppression and is susceptible to variations in noise direction and device
position. These variations degrade the user experience because the distracting noise randomly appears and disappears. Overall performance is highly sensitive to manufacturing variations in microphones.



Voice activity detectionprevents noise when a user is not talking and passes through noise when the user is talking.

While these techniques are often combined, they do not mitigate one anothers shortcomings, and the result can be
inconsistent performance, poor voice quality and a poor user experience.

Our solution

We provide intelligent voice and audio solutions that substantially improve sound quality and suppress noise in mobile devices. We believe that our approach addresses the challenge of providing clear and consistent
voice and audio quality more effectively than other available solutions. Our platform consists of our proprietary, purpose-built DSPs, analog and mixed signal circuits and algorithms for voice isolation and noise suppression. In addition, we provide
our proprietary AuViD graphical design tools to help OEMs design in and tune our products in their efforts to bring the best voice and audio quality mobile devices rapidly to market.

Benefits to mobile device users

Our solutions improve user experiences by delivering the following benefits:



Differentiated voice and audio quality. Our products substantially improve voice quality and reduce background noise
in mobile devices wherever they are used. Users can more comfortably hear and be heard in noisy environments, such as the sidewalk of a busy street, a sporting event or an airport terminal, without needing to elevate their voices, strain to hear or
mute their lines. Users can speak quietly and in a normal tone of voice while in a noisy environment, thereby gaining privacy. Users can also experience the benefits of wideband networks more fully without the background noise interference to which
wideband communication is particularly susceptible.



Consistent voice and audio experience. Our products enable a more consistent voice and audio experience, regardless of the use case
or the surrounding noise environment. Our voice isolation and noise suppression techniques enable users to communicate clearly irrespective of noise type or location, such as background noise, acoustic echo or unwanted voices or sounds. The quality
of our solution is robust on either narrowband or wideband networks and is not significantly impacted by the angle or position of the mobile device relative to the user. Our solutions effectively support video calling on mobile devices, a far-field
use case.



Robust speech recognition. By combining our high-quality voice isolation capability with next generation third-party speech
recognition software, our intelligent voice and audio solutions improve the user experience with speech recognition applications. For example, users are better able to use their devices speech-to-text applications to find driving directions
without needing to manually type the address. Users can also use voice commands to search while holding their devices at a distance to simultaneously see search results.



Clarity of audio capture and playback. We believe that demand for creating and viewing user-generated content will lead users to
select devices that feature differentiated HD audio and video capture. Our solutions enable functions relying on voice and audio to work in a more robust and consistent manner. Users can take part in HD video conference calls or record HD video,
where our solutions can isolate or improve the accompanying audio. Users also experience improved voice and audio quality on streaming or downloadable video, music and television content, even on small, inexpensive mobile device speakers.

Our technology and collaboration efforts also benefit other members of the mobile device ecosystem, including OEMs, MNOs, mobile operating system providers and application vendors.



Original equipment manufacturers. OEMs can more effectively differentiate their mobile devices by providing a better user
experience when our intelligent voice and audio solutions are incorporated into their products. Our processors also provide more consistent performance over variations in device manufacturing tolerances. OEMs benefit from our processors small
die size, power-efficient design and our support capabilities, including our development and integration tools which ensure seamless compatibility and rapid time to market.



Mobile network operators. By improving the user experience, we believe that our processors can increase user demand for mobile
communication services, enhance user satisfaction and promote user loyalty. Our processors noise suppression capabilities also have the potential to increase network capacity for MNOs by reducing the transmission of noise.



Mobile operating system providers. Mobile operating system providers benefit from our processors ability to intelligently
analyze and understand the sound environment in support of speech recognition, multimedia and other applications.

Since our founding, we have focused on understanding sound to improve the user experience. We have combined auditory neuroscience and technology to improve voice and audio quality in mobile devices. In so doing, we
have created a new category of advanced voice and audio solutions for mobile devices. Our leadership position in this category results from the following core strengths:



Deep domain expertise in voice and audio communications. Our team includes leading innovators in CASA, speech analysis and coding,
spatial audio and acoustics, among other disciplines. More than two-thirds of our research and development team have advanced engineering degrees. At Audience, this team has leveraged that experience to develop and deploy two generations of
CASA-based voice and audio products, creating a new category of voice and audio processors.



Differentiated, scalable technology platform. Our proprietary platform offers high-quality voice and audio performance at low power
by leveraging our purpose-built DSPs and algorithms. Our CASA-based architecture scales with compute power and across new applications and use cases. We believe this ability to scale our technology differentiates us from alternative approaches to
voice and audio quality. Additionally, the flexibility of our platforms design interface makes it easy for customers to integrate our products into a wide range of mobile devices.



Strong relationships with industry leading MNOs and operating system developers. Our collaboration with leading MNOs provides us
visibility into critical design specifications and development timelines, which helps to keep us at the forefront of technological innovation in voice and audio solutions. We are actively engaged with leading MNOs, including AT&T, China Mobile,
Orange, Sprint Nextel, Telecom Italia, T-Mobile, Verizon and Vodafone. In addition, we are building relationships with operating system providers, such as Google, Inc., whose operating system enables speech recognition and other applications that
can leverage the capabilities of our platform.



Collaboration and repeat design wins with leading OEMs. Through close, long-term relationships with OEMs, we gain both a unique
understanding of their product roadmaps and an ability to influence design decisions. These insights help us to anticipate our key OEMs future voice and audio challenges and drive our product and technology roadmap. As of December 31,
2011, our processors had been incorporated in over 60 mobile device models that have reached commercial production, including those sold by leading OEMs, such as Apple through its CMs Foxconn and Protek, HTC, LG, Pantech, Samsung, Sharp and Sony. We
believe that these OEMs have repeatedly selected us based on the high quality, performance and reliability of our solutions.



Significant OEM design support capabilities. We work closely with OEMs throughout their design processes using our proprietary
AuViD graphical design tools to integrate our solutions into their mobile devices, which enables us to improve design efficiency, increase productivity and establish differentiated design relationships with OEMs. Our design support capabilities
enable OEMs to efficiently deploy our solutions across their portfolio.



Significant intellectual property portfolio in voice and audio technologies. Our intellectual property consists of core technology
related to mapping the human auditory system within a computational framework, as well as the technology, tools and methods related to the implementation of these technologies in mobile devices. As of December 31, 2011, this intellectual
property included six issued U.S. patents, 72 pending U.S. patent applications and 37 pending foreign patent applications, as well as proprietary analog and digital signal processing building blocks, optimizations for programmable DSP architectures,
multimedia processing, audio algorithms, audio codecs and amplifiers, embedded firmware and operating systems, tools and audio tuning capabilities.

Our mission is to be the leading provider of intelligent voice and audio solutions for the mobile device and consumer electronics markets. Key elements of our
strategy include:



Innovate to further improve the user experience. We believe that there is significant opportunity for substantial improvement in
voice and audio quality relative to capabilities available in the market today. We expect users to continue to demand improved voice quality during mobile phone calls, as well as an expanding range of mobile device uses and applications. We intend
to continue to develop innovative voice and audio solutions to satisfy that demand.



Improve and extend our proprietary platform. Our technology is built upon a unique approach to voice and audio processing that
begins by modeling the human auditory system. We intend to advance our modeling of this system to access its untapped potential within our scalable architecture. Modeling advancements will allow us to improve our platforms performance and to
incorporate added capabilities and features into future product generations that support new applications in real-time communications, speech recognition and multimedia.



Develop and expand relationships with OEMs. Our solutions enable OEMs to differentiate their products in their highly competitive
markets. We intend to continue to develop relationships with new OEMs and to expand our existing engagements to increase our solutions penetration across OEMs product platforms. In addition, we intend to continue to develop our
application engineering capabilities to more rapidly integrate our voice and audio solutions into new device platforms.



Extend collaboration with leading MNOs and operating system developers. We intend to continue our work with MNOs to improve the
user experience with mobile devices on their networks. We also intend to continue to partner with MNOs to extend our reach into additional international markets. We expect to work with mobile operating system and applications developers to further
align our solutions and to refine our roadmap to support future generations of software applications.



Leverage our technology leadership to penetrate new market segments. Our proprietary technology can be applied to numerous adjacent
market segments where users will benefit from improved voice and audio capabilities. These new market segments may include automobile infotainment systems, desktop PCs, digital cameras, digital televisions, headsets and set top boxes.

Our technology

We collaborate
with leading experts in auditory neuroscience to understand the detailed function of the human auditory pathway, uniquely combining science and technology to model the functions of human hearing. Our architecture combines scientific breakthroughs
with DSP hardware acceleration to deliver a solution with the intelligence of human hearing in the size and power constraints of mobile devices.

The
human auditory system is remarkable for its ability to identify and isolate individual sources within a complex sound mixture to enable people to hear the desired sound source clearly. To effectively manage the separation and identification of
individual sounds, the human hearing system evaluates the entire auditory scene based on a variety of characteristics. Employing the science of CASA, our proprietary technology has been designed to intelligently characterize, group, classify the
auditory scene and isolate a speakers voice from noise.

Our proprietary CASA-based algorithms provide a rich, highly integrated capability we use
to deliver leading-edge voice and audio quality solutions. Our platform allows us to create custom, hardware-accelerated DSPs, purpose-built for our algorithms, to provide top performance with low power characteristics. Our core technology has
already scaled from basic calls to more difficult voice use

cases, such as wideband speakerphone mode. We believe our dedicated approach to voice and audio processing will continue to enable our solutions to scale along with the demands in mobile devices
for increased performance and more robust feature sets. Our architecture will allow us to incorporate additional intelligence into our solutions in each of the processing stages, such as adding new characterization cues to enable more refined
decision making. We believe that this will enable our solutions to better address new and more challenging use cases and noise conditions as compared to traditional approaches.

The following descriptions and diagram of corresponding stages depict our CASA-based architecture.



Fast Cochlea Transform (FCT). Our proprietary FCT architecture, based on the human cochlea, transforms incoming sound waves into
frequency components in order to map the digital audio stream into a three-dimensional representation of the sound mixture. This approach has significant benefits over the typical method, the Fast Fourier Transform (FFT). In particular, it offers
much higher spectro-temporal resolution than is possible using FFT, enabling precise characterization and analysis of the auditory scene, similar to the analysis that occurs in the human auditory pathway. Our solutions attain this resolution with
very low latency, which is necessary for use in real-time communications. This combination of high resolution and low latency is unique to the FCT.



Characterization. During characterization, our solutions identify and compute the acoustic properties of incoming sounds according
to fundamental attributes such as pitch, harmonics, spatial location, temporal and other information in the frequency domain. The diversity and precision of our characterization is essential to making intelligent decisions in the grouping stage
which follows.



Grouping. Following characterization, our solutions group the FCT domain components of the sound mixture into individual sources
according to a variety of CASA principles, such as common location, onset time and fundamental frequency, as well as timbral consistency. Information from the characterization stage is simultaneously evaluated in real time, including time alignment,
in order to decide which FCT domain energy belongs to which sound source. In this way, individual sound components are grouped to create separate audio streams, which are then tracked independently.



Voice isolation. Once all of the individual sound components have been properly characterized and grouped into discrete streams,
the sound source of interest is selected. Importantly, the isolation stage enables the intelligent separation of voice from other components of the sound mixture, eliminating noise and other audio to deliver clear voice and audio to users.



Inverse FCT. As a final stage, the inverse FCT is responsible for reconstructing the FCT data back into high-quality digitized
audio for further transmission.

Our processors
provide dedicated computational power for the implementation of our proprietary, CASA-based algorithms. These processors have been optimized for both performance and power and utilize advanced hardware acceleration techniques. Our product portfolio
supports both analog and digital interfaces to provide added design flexibility for our customers.

We design our solutions to deliver consistent
performance. Incorporating over 10 years of field testing and device data, our solutions deliver improved voice and audio quality and noise suppression in near and far-field modes and at different handset orientations. Our processors deliver
noise suppression in real world environments by removing both stationary and nonstationary noise for narrowband and wideband communications.

Key
features of our products include:

Real time communication voice quality



Nonstationary noise suppression: Suppression of dynamic distracters, such as background voices or music, characterized by rapid or
random changes.



Transmit and receive: Simultaneous signal processing along both the transmit and receive paths. In the transmit path, the
users auditory scene is processed before transmission to the listener on the other end. In the receive path, the audio stream from the other end is improved by our solution and then presented to the near end listener.



Near-field and far-field capability: More consistent voice and audio quality wherever the device is held and used.



Narrowband and wideband: Capable of signal processing for both narrowband and wideband signals.

Acoustic echo cancellation: Cancellation of echo caused by acoustic conditions that redirect sound, such as the acoustic coupling
between a mobile devices speakers and microphones.

Automatic speech recognition (ASR) assist



ASR assist: Improves accuracy and performance of speech enabled applications in the presence of noise.

Multimedia improvement



Parametric equalization: Post-processing of music streams during playback to emulate audio profiles such as rock, classical, jazz
and other custom profiles by enhancing specific frequencies in the audio stream.



Stereo widening: Improvement of music playback over headphones or stereo loudspeakers by expanding the perceived spatial separation
of different sounds.

Our processors range in performance and functionality to meet the multiple needs of various mobile devices. We currently offer the earSmart eS305, eS310, A1026, A1028 and custom voice and audio processors for
device platforms including smartphones, feature phones and media tablets. These processors are accompanied by our integration tools and support. We offer the following processors:



eS305: Second generation voice and audio processor utilizing new hardware acceleration architecture and algorithms for far-field,
wideband communications and capable of advanced speech recognition assist; uses an all digital interface.



eS310: Provides similar capabilities to the eS305. It also provides flexible connectivity to adjacent components, including both
analog and digital interfaces.

A1028: First generation narrowband voice processor designed for real-time communications and far-field as well as near-field use.

The following table summarizes the feature set of our processors:

A1026

A1028

eS305/eS310

January 2010

October 2010

February 2011/June 2011

Feature

1st Generation

1st Generation

2nd Generation

Two microphone processing

ü

ü

ü

Acoustic echo cancelation

ü

ü

ü

Audience HiFi voice

ü

ADC and DAC interfaces(1)

ü

ü

ü

Stationary noise narrowband

ü

ü

ü

Stationary noise wideband

ü

Non-stationary noise

over narrowband

Near-field Far-field

Over receive
path

ASR assist

ü

ü

ü

ü

ü

ü

ü

ü

Non-stationary noiseover wideband

Near-field

Far-field

Over receive path

ASR assist

ü

ü

ü

ü

Multimedia

Parametric equalization

Stereo widening

ü

ü

End market served

Smartphones

Feature phones

Media tablets

ü

ü

ü

ü

ü

ü

(1)

ADC is analog to digital converter and DAC is digital to analog converter.

Figure 4: Product differentiation by feature

Custom solutions: We sell a
customized version of one of our processors to Foxconn and Protek. We have also licensed our semiconductor intellectual property, which we refer to as processor IP, for custom designs to a single OEM for integration into its mobile devices.

Integration tools and support: We provide OEMs with our AuViD graphical design tools
enabling them to efficiently integrate and customize the features of our voice and audio processors across a multitude of device designs. These tools feature an easy-to-use visual design interface and facilitate rapid and cost-effective design
integration. Our applications and technical sales engineers work closely with OEMs to provide design support from device concept through field testing.

Customers

We derive our revenue primarily from the sale of
our voice and audio processors to OEMs which incorporate them into mobile devices. We currently have design wins for our voice and audio processors to OEMs in North America and Asia. As of December 31, 2011, OEMs, CMs and distributors worldwide
had purchased more than 135 million of our processors and incorporated them in over 60 mobile device models that have reached commercial production. In 2008, 2009, 2010 and the nine months ended September 30, 2011, sales to CMs and OEMs
with manufacturing operations and distributors in Asia represented substantially all of our revenue. See Note 12 of our consolidated financial statements for a discussion of our revenues by geographic region.

OEMs design in our products and either procure them directly from us or indirectly through CMs or distributors. OEMs and their CMs and distributors generally
purchase our voice and audio processors on a purchase order basis and do not enter into long-term contracts or have minimum purchase commitments with us that would obligate them to purchase additional products from us in the future.

Since we began generating revenue in 2008, Apple, through its CMs, Foxconn and Protek, HTC, LG, Pantech, Samsung, Sharp and Sony have incorporated our products into
certain smartphones and feature phones, and, in the case of HTC, media tablets. Foxconn accounted for 81% and 70% of our total revenue in 2010 and the nine months ended September 30, 2011, respectively. Samsung accounted for 17% of our total
revenue in the nine months ended September 30, 2011. In 2009, HTC, LG and Uniquest, a distributor for Samsung, accounted for 36%, 45% and 15% of our total revenue, respectively. In 2008, LG, Pantech and Midoriya, a distributor for Sharp,
contributed 18%, 20% and 60% of our total revenue, respectively. We expect that our relationships with Foxconn and Protek, their OEM and Samsung will continue to account for a substantial portion of our total revenue for the remainder of 2011 and
2012. No other OEM, CM or distributor accounted for 10% or more of our total revenue in 2008, 2009, 2010 or the nine months ended September 30, 2011.

On August 6, 2008, we entered into an agreement with Apple. Pursuant to the terms of the agreement, we develop, supply and support a custom version of one of
our processors and related software to Foxconn and Protek for use in certain mobile phones. Pursuant to the terms of the agreement, we also license processor IP for certain mobile devices. We have entered into statements of work under the agreement
that set forth terms and conditions specific to licensing processor IP. While we expect to continue to sell our processors to Foxconn and Protek in the three months ending March 31, 2012, we also expect to begin to receive royalties for the use
of our processor IP in other mobile phones sold by the same OEM.

We may enter into license agreements with this OEM two years or more before we begin to
receive royalty revenue on shipments of mobile devices incorporating our processor IP. Under a license agreement we entered into in 2008, we will begin to receive royalty payments in the three months ending March 31, 2012. As part of our 2008
license, we are entitled to receive a royalty for each mobile device that is sold incorporating and, with respect to mobile devices other than mobile phones, enabling our processor IP.

We entered into an additional license agreement in 2010 relating to a new generation of our processor IP; however, the
OEM is not obligated to use this new processor IP, or previous processor IP we have licensed, in its mobile devices. For the new generation of processor IP, the royalty is subject to a quarterly maximum, after which we would not receive royalties
for shipments of mobile devices into which that processor IP is integrated.

Under our agreement, we provide custom processors to Foxconn and Protek,
which we cannot develop, manufacture or distribute to third parties unless the OEM for which Foxconn and Protek produce mobile phones ceases development of its mobile devices incorporating our product for reasons other than our default. We are
required to afford Foxconn and Protek priority allocation of processors in the event of a supply constraint. Foxconn and Protek are not obligated to purchase any of our processors and their OEM is not obligated to integrate or enable our processor
IP in any of its current or future products. This OEM and its affiliates are not precluded from developing competing products or technologies internally and designing those internally developed products and technologies into its mobile devices. The
term of the agreement is perpetual until terminated for cause by either party. This OEM may terminate a written statement of work under the agreement for any reason by providing notice at least 30 days prior to termination. Under the agreement,
we have obligations to indemnify this OEM against, among other things, losses arising out of or in connection with any claim that our technology or services infringe third-party proprietary or intellectual property rights.

Sales and marketing

We sell our voice and audio processors
to OEMs and their CMs through a direct sales force aided in certain regions by third-party sales representatives. For some OEMs, distributors purchase processors from us to fulfill the OEMs orders. We maintain sales operations, which include
our direct sales force, third-party sales representatives and distributors, in Asia, North America, Japan and Europe. Substantially all of our revenue has been generated by sales to CMs and OEMs that manufacture their products in Asia and
distributors in Asia. We expect sales to CMs and OEMs in Asia to contribute a majority of our revenue for the foreseeable future. As of December 31, 2011, we had 66 employees in sales and marketing, including our application engineers and
technical sales people, located in North America, Asia and Europe.

We have also worked with MNOs to educate them about factors contributing to voice and audio quality in order to enable them to further improve customer satisfaction. We work with MNOs to encourage OEMs to
incorporate intelligent voice and audio solutions in their products.

We also comarket our earSmart technology with AT&T, Sharp and Wal-Mart Stores,
Inc., with information regarding our technology featured on product packaging, advertising and promotional materials.

Manufacturing and operations

We operate a fabless business model and outsource the manufacturing of our voice and audio processors. Manufacturing includes the fabrication of
integrated circuits, assembly, packaging and test. We currently rely on TSMC to produce most of our voice and audio processors at three of its fabrication facilities in Taiwan. We have also engaged Globalfoundries to produce some of our voice

and audio processors at two of its fabrication facilities in Singapore and anticipate beginning commercial production at these locations during 2012. In addition, we rely on third parties, such
as Signetics, for assembly, packaging and test, and other contractors for logistics. We do not have any long-term supply agreements with our foundries or our assembly, packaging, test and logistics vendors. This outsourced manufacturing approach
allows us to focus our resources on the design, sale and marketing of our products. In addition, we believe that outsourcing our manufacturing provides us the flexibility needed to respond to variations in customer demand, simplifies our operations
and significantly reduces our capital requirements.

Competition

The market for mobile device components is highly competitive and we expect competition to intensify in the future. There are a number of components in the voice and audio subsystem of a mobile device including
baseband processors, audio codecs and voice and audio processors. Currently, we provide only voice and audio processors and do not compete in other aspects of the mobile device component market. In the future, we may elect to expand our offerings to
include other subsystem components and we would need to compete against companies offering those subsystem components. Companies that currently compete for sales of other mobile device components may enter the voice and audio processor market with
stand-alone components or components with other functionalities and compete with us.

We currently face competition from a number of established
companies that produce components for the mobile device audio subsystem, including companies that produce dedicated voice and audio solutions, such as Maxim, ON Semiconductor, Qualcomm, Texas Instruments, Wolfson and Yamaha. We also face competition
from smaller, privately held companies and could face competition from new market entrants, whether from new ventures or from established companies moving into the areas of voice and audio subsystems that our products address. We also compete
against solutions internally developed by OEMs, as well as combined third-party software and hardware systems.

Our ability to compete effectively
depends on a number of factors, including:



our processors scalability, performance, quality, ease of use and cost effectiveness relative to those of our competitors products;



our success in developing and creating demand for new and proprietary technologies to offer products and features previously not available in the marketplace;



our success in identifying new markets, applications and technologies;



our ability to attract, retain and support other OEMs and to establish and maintain relationships with MNOs;

our products interoperability with various data access protocols and other voice and audio subsystem components of mobile devices;



our ability to continue to establish greater name recognition and build upon our reputation in the industry;



our ability to respond effectively to aggressive business tactics by our competitors, including selling at lower prices or asserting intellectual property rights
irrespective of the validity of the claims; and

With respect to these factors, based on publicly available data, we believe that we compete favorably on performance,
scalability and cost.

Research and development

Since our inception we have made substantial investments in research and development. We have research and development facilities in Mountain View, California,
Scotts Valley, California and Lafayette, Colorado. We also contract for certain research and development services that are performed by a third party in Bangalore, India. As of December 31, 2011, we had 85 employees in research and
development. Our focus is to further develop our current voice and audio processors, develop new products that achieve market acceptance, maintain technological competitiveness and meet an expanding range of mobile device requirements. A majority of
our research and development employees focus on software development. Our team includes leading innovators in CASA, speech analysis and coding, spatial audio and acoustics, among other disciplines. More than two thirds of our research and
development team has an advanced engineering degree.

Our total expenses for research and development for 2008, 2009, 2010 and the nine months ended
September 30, 2011 were $9.1 million, $9.0 million, $11.4 million and $14.6 million, respectively.

Intellectual property

Our success depends in part upon our ability to develop and protect our core technology and intellectual property. We rely primarily on a
combination of trade secret, patent, copyright and trademark laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights. Our products are provided to OEM customers pursuant to
agreements that impose restrictions on use and disclosure. Our agreements with employees and contractors who participate in the development of our core technology and intellectual property include provisions that assign intellectual property rights
to us. In addition to the foregoing protections, we generally control access to our proprietary and confidential information through the use of internal and external controls.

As of December 31, 2011, we held six U.S. patents expiring between July 19, 2019 and November 11, 2030 and also had 72 U.S. patent applications pending. As of December 31, 2011, we also had 37
foreign patent applications pending. Pending patent applications may receive unfavorable examination and are not guaranteed allowance as issued patents. We may elect to amend, abandon, or otherwise not pursue prosecution of certain pending patent
applications or of certain inventions disclosed in those patent applications due to patent examination results, strategic concerns, economic considerations or other factors. To the extent that a patent is issued, any such issued patent may be
contested, circumvented, found unenforceable or invalidated and we may be unwilling or unable to prevent third parties from infringing a particular patent. Moreover, we cannot assure you that we can successfully use our patents to prevent
competitors from copying our products or developing competing technologies. We will continue to assess appropriate occasions to seek patent protection for aspects of our technology that we believe provide us a significant competitive advantage in
the market.

As of December 31, 2011, we had registered the trademarks for AUDIENCE, hear and be heard, Fast Cochlea Transform and
the worlds most intelligent voice processor in the United States. As of December 31, 2011 we had registered the trademark for AUDIENCE in the EU, Japan and South Korea. Additionally, we have trademark applications pending in
the United States for earSmart, the future of voice is hear and the earSmart logo. We also have trademark applications pending in the EU, Japan and South Korea for hear and be heard, earSmart and the earSmart logo. We also
have a pending application in South Korea for the worlds most intelligent voice processor.

As
of December 31, 2011, we had 189 employees in offices across North America, Asia and Europe including 66 employees in sales and marketing, 85 in research and development, 13 in manufacturing and operations and 25 in finance and
administration. We consider our current relationship with our employees to be good. None of our employees are represented by labor unions or have collective bargaining agreements.

Properties

Our principal administrative, sales, marketing, customer support and research and development
facility is located at our headquarters in Mountain View, California. We currently lease approximately 47,536 square feet of office space at the Mountain View facility pursuant to two leases, with one lease expiring August 4, 2012, subject to
extension to December 31, 2013, and the other January 31, 2013. In addition to our headquarters, we lease 1,833 square feet of office space in Scotts Valley, California and our lease for this facility expires on September 16, 2012. We
also lease approximately 1,875 square feet of office space in Lafayette, Colorado for research and development and our lease for this facility expires on February 1, 2012. We also lease 2,067 square feet of office space in Korea and our lease
for this facility expires on March 31, 2012. We believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business. We intend to add new facilities or expand existing facilities as we add
employees or expand our markets and we believe that suitable additional space will be available as needed to accommodate any such expansion of our operations.

Legal proceedings

We are currently not a party to any legal proceedings. From time to time, we may be involved
in legal actions arising in the ordinary course of business.

The following table sets forth information regarding our executive officers
and directors and their ages as of December 31, 2011:

Name

Age

Position

Peter B. Santos

52

President, Chief Executive Officer and Director

Kevin S. Palatnik

54

Chief Financial Officer

Sanjay Adkar

55

Vice President of Engineering

Andrew J. Keane

49

Vice President of Marketing

Andrew J. Micallef

46

Vice President of Operations

Robert H. Schoenfield

48

Vice President of Business Development

Thomas Spade

45

Vice President of Sales

Forest Baskett(1)(2)(3)

68

Director

Barry L. Cox

69

Director

Marvin D. Burkett(1)(2)

69

Director

Mohan S. Gyani(3)

60

Director and Chairman of the Board

George A. Pavlov(1)(2)(3)

51

Director

(1)

Member of our audit committee.

(2)

Member of our compensation committee.

(3)

Member of our nominating and corporate governance committee.

Executive officers

Peter B. Santos has served as our
president, chief executive officer and director since October 2005. From June 2004 to October 2005, Mr. Santos served as our vice president of marketing and business development. From 2001 to 2003, Mr. Santos was vice president of
marketing and business development at Barcelona Design, Inc., an analog semiconductor intellectual property company. From 1998 to 2001, Mr. Santos was vice president of marketing at Voyan Technology Inc., a DSL systems provider. From 1996 to
1998, Mr. Santos served as director of services marketing at Cadence Design Systems, Inc., an electronic design automation software company. Mr. Santos also spent six years at LSI Corp., an ASIC solutions company, where he led worldwide
ASIC product marketing. Mr. Santos received a B.A. from Colby College and an M.B.A. from the University of North Carolina. We believe that Mr. Santos possesses specific attributes that qualify him to serve as a member of our board of
directors, including his extensive experience in the semiconductor and telecommunications industry and the operational insight and expertise he has accumulated as our president and chief executive officer.

Kevin S. Palatnik has served as our chief financial officer since August 2011. From 1994 to 1999 and June 2001 to November 2010, Mr. Palatnik held
various positions at Cadence Design Systems, Inc., including corporate controller and most recently as senior vice president and chief financial officer. Mr. Palatnik also spent 14 years at IBM Corporation where he held various engineering
and executive financial positions. Mr. Palatnik received a B.S. and an M.B.A. from Syracuse University.

Sanjay Adkar has served as our vice
president of engineering since February 2010. From February 2006 to March 2009, Mr. Adkar served as the executive vice president of engineering at BrightScale,

Inc., a semiconductor company. From February 2005 to February 2006, Mr. Adkar was executive vice president of engineering for Netcell Corporation, a storage processing company, and held the
same position with NeoMagic Corp., a semiconductor company, from May 2000 to January 2005. Mr. Adkar also held various engineering positions with National Semiconductor Corp., LSI and Tandem Computers, Inc., a computer systems company.
Mr. Adkar has served on the board of directors of Surabhi, Inc. since January 1995. Mr. Adkar received a B.S.E.E. from the Indian Institute of Technology in Bombay, India and earned a M.S.E.E. and M.S. in computer science from Virginia
Polytechnic Institute and State University.

Andrew J. Keane has served as our vice president of marketing since November 2011. From February 2006
to May 2011, Mr. Keane served as vice president and general manager of Tesla Computing at NVIDIA Corp., a visual computing technologies company. From 1995 to 2005, Mr. Keane held either vice president of marketing or vice president of
sales and marketing positions at Ageia Technologies, Inc., a fabless semiconductor company, Cooligy, Inc., a thermal management solutions company, Morphics Technology, Inc., a communication systems company, Quantum Effects Devices, Inc., a
microprocessor company, PMC-Sierra, Inc., a semiconductor company, and 3Dfx Interactive, Inc., a manufacturer of graphics cards. Mr. Keane earned a B.S. from the Rensselaer Polytechnic Institute and an M.B.A from the University of California,
Berkeley.

Andrew J. Micallef has served as our vice president of operations since July 2010. From April 2007 to February 2010, Mr. Micallef
served as executive vice president of worldwide manufacturing and operations at LSI. From October 2000 to April 2007, Mr. Micallef held various positions at Agere Systems Inc., an integrated circuit components company, where he most recently
served as executive vice president of global operations. From August 1995 to August 2000, Mr. Micallef also held various operations and finance positions at Fujitsu-ICL Systems, a provider of IT products and services, and from June 1993 to
August 1995 at IBM. Mr. Micallef also spent three years at General Dynamics, where he worked as a mechanical and fluid systems design engineer. Mr. Micallef earned a B.S. from the University of Notre Dame and an M.B.A. and M.S. in
engineering from the University of Michigan.

Robert H. Schoenfield has served as our vice president of business development since March 2011.
From November 2009 to February 2011, Mr. Schoenfield was vice president of sales for North America at Polaris Wireless, Inc., a software-based location systems company. From January 1999 to October 2009, Mr. Schoenfield served in several
positions with Aeris Communications, Inc., a mobile network operator, the most recent of which was senior vice president of sales, marketing and business development and he previously served as president of their South American division.
Mr. Schoenfield also held various executive roles managing sales and business development for Tetra Tech, Inc., an environmental engineering and consulting company, from November 1995 to October 1998, and Nextel Communications, Inc., a
telecommunications company, from April 1992 to September 1995. Mr. Schoenfield earned a B.S. from San Francisco State University.

Thomas
Spade has served as our vice president of sales since August 2010. From August 2009 to August 2010, Mr. Spade was vice president of global sales for portable power at Boston-Power, Inc., a battery systems company. From May 2007 to August
2009, Mr. Spade served as vice president of global sales at Validity, Inc., a sensor technology company. From April 1998 to May 2007, Mr. Spade held various positions at Synaptics Incorporated, a human interface solutions company, the most
recent of which was vice president of worldwide sales. Previously, Mr. Spade held senior sales positions at Alliance Semiconductor Corporation. Mr. Spade holds a B.S. from Albion College.

Barry L. Cox has served as one of our directors since October 2009 and served as our chairman from October 2009 to August 2011. From June 2005 to August
2009, Mr. Cox served as executive chairman of the board of directors of BrightScale. From July 1998 to August 2000, Mr. Cox served as executive chairman of the board of directors at Quantum Effect Devices. Mr. Cox also held executive
roles at Weitek Corp., a semiconductor design company, and ATEQ Corp., a semiconductor equipment manufacturing company that Mr. Cox co-founded. Mr. Cox also spent eight years at Intel Corporation, most recently as president of Intel
Europe. From February 2003 to April 2006, Mr. Cox served as chairman of the board of directors for Nova Measuring Instruments Ltd., a semiconductor capital equipment company. Mr. Cox also served on the boards of directors of Softier, Inc.,
an IPTV software solutions company, from November 2004 to April 2007, of Nanoconduction, Inc., a nanotechnology company, from June 2007 to September 2008, of GigaFin Networks, Inc., a network appliance company, from October 2007 to November 2008 and
of Grandis, Inc., a semiconductor company, from July 2008 to September 2011. Currently, Mr. Cox is a member of the board of directors of Summit Microelectronics, Inc., a semiconductor company. Mr. Cox holds a B.S. from the United States
Air Force Academy and an M.B.A. from Boston University. We believe that Mr. Cox possesses specific attributes that qualify him to serve as a member of our board of directors, including his extensive experiences as an executive in the
semiconductor industry and as a board member of other privately held companies.

Forest Baskett has served as one of our directors since April
2006. Dr. Baskett joined New Enterprise Associates, Inc., a venture capital firm, in 1999 and became a General Partner in 2004. From 1986 to 1999, Dr. Baskett was senior vice president of research and development and chief technology
officer at Silicon Graphics Inc., a computing solutions company. Prior to Silicon Graphics, Dr. Baskett founded and directed the Western Research Laboratory of Digital Equipment Corporation, a computer manufacturer, and was a professor of
computer science and electrical engineering at Stanford University. During the past five years Dr. Baskett has served on the boards of directors of Atheros Communications, Inc. from March 2000 to April 2007, Aeluros, Inc. from August 2001 to
October 2007, Fulcrum Microsystems, Inc. from August 2001 to August 2011, T-RAM Semiconductor, Inc. from May 2002 to October 2008, Agility Design Solutions, Inc. from July 2003 to December 2008, SiBEAM, Inc. from December 2004 to April 2011, Arch
Rock Corporation from September 2005 to September 2010, RingCube Technologies, Inc. from February 2006 to July 2008, Foveon, Inc. from March 2006 to November 2008 and Aprius, Inc. from October 2006 to June 2011. Currently, Dr. Baskett is a
member of the boards of directors of AstroWatt, Inc., Chelsio Communications Inc., Azuray Technologies, Inc., Bandgap Engineering, Inc., Firefly Green Technologies, Inc., Fusion-io, Inc., Illumitex, Inc., Luxtera, Inc., Solar Junction Corporation,
Terrajoule Corporation (f/k/a Solar Storage Company), SuVolta, Inc., Svaya Nanotechnologies, Inc., Serious Energy, Inc. (f/k/a Serious Materials, Inc.), Tableau Software, Inc., and Tintri, Inc. Dr. Baskett earned a B.A. from Rice University and
a Ph.D. in computer science from the University of Texas at Austin. We believe that Dr. Baskett possesses specific attributes that qualify him to serve as a member of our board of directors and as chair of the compensation committee and a
member of our audit and nominating and governance committee, including his experience as a director of technology companies and his background in the venture capital industry.

Marvin D. Burkett has served as one of our directors since August 2010. From September 2002 to February 2009, Mr. Burkett was chief financial officer and chief administrative officer for NVIDIA Corp.
From February 2000 to September 2002, Mr. Burkett served in various capacities at Arcot Systems, Inc., a cloud-based authentication company, the most recent of which was as its chief financial officer. From 1998 to 1999, Mr. Burkett served
as executive vice president and chief financial officer of

Packard Bell NEC, Inc., a telecommunications company. From 1972 to 1998, Mr. Burkett served in various capacities at Advanced Micro Devices, Inc., a semiconductor company, the most recent of
which was as its chief financial officer. Prior to Advanced Micro Devices, Mr. Burkett worked at Raytheon Company, a defense contractor. Currently, Mr. Burkett is a member of the board of directors of Entegris Corporation, G2 Holdings
Corporation, Intermolecular, Inc. and NetLogic Microsystems, Inc. Mr. Burkett holds a B.S. and an M.B.A. from the University of Arizona. We believe that Mr. Burkett possesses specific attributes that qualify him to serve as a member of our
board of directors and serve as chair of our audit and a member of our compensation committee, including his deep financial background and his experience in the semiconductor industry.

Mohan S. Gyani has served as one of our directors since March 2011 and as our chairman since August 2011. Since May 2005, Mr. Gyani has served in various capacities at Roamware, Inc., a mobile roaming
solutions company, the most recent of which was vice chairman. From March 2000 to November 2002, Mr. Gyani served as president and chief executive officer of AT&T Wireless Services, Inc., a telecommunications company. From September 1995 to
1999, Mr. Gyani was an executive vice president and chief financial officer of AirTouch Communications, Inc., a wireless telephone service provider. Prior to AirTouch Communications, Mr. Gyani spent 15 years with Pacific Telesis
Group, Inc. of Pacific Bell, a telecommunications company. From June 2007 to June 2010, Mr. Gyani served on the board of directors of Mobile Telesystems, Inc. Currently, Mr. Gyani serves on the boards of directors of Keynote Systems, Inc.,
Safeway, Inc., Union Bank, N.A., Ruckus Wireless, Inc., Ring Central, Inc. and Mformation Technologies, Inc. Mr. Gyani holds a B.A. and an M.B.A. from San Francisco State University. We believe that Mr. Gyani possesses specific attributes
that qualify him to serve as a member of our board of directors and a member of our nominating and corporate governance committee, including his service as a director of a diverse set of companies and his broad experience in the telecommunications
industry.

George A. Pavlov has served as one of our directors since December 2003. Mr. Pavlov has served as a general partner of Tallwood
Venture Capital, a venture capital firm focused on semiconductor technologies, since its founding in June 2000. From April 2000 to July 2001, Mr. Pavlov served as the chief executive officer of eTime Capital, Inc., a financial services company.
From April 1996 to April 2000, Mr. Pavlov served as a general partner and chief financial officer at Mayfield Fund, a venture capital firm. From February 1991 to April 1996, Mr. Pavlov served as managing director and chief financial
officer with Blum Capital Partners, a private equity firm. Mr. Pavlov also spent four years in financial and sales management positions at NeXT Computer, Inc., a computer hardware and software company. From May 2009 to May 2010, Mr. Pavlov
served on the board of directors of Ozmo Devices, Inc. Currently, Mr. Pavlov is a member of the boards of directors of Alphion Corp., Amulaire Thermal Technology, Inc., Astute Networks, Inc., Calypto Design Systems, Inc., Crossing Automation,
Inc., Ikanos Communications, Inc., Quintic Corporation and SVTC Technologies, Inc. Mr. Pavlov holds a B.S. from Boston College. We believe that Mr. Pavlov possesses specific attributes that qualify him to serve as a member of our board of
directors and as chair of the nominating and governance committee and a member of our audit and compensation committees, including his deep financial and accounting background and his service as a director of various semiconductor companies.

Board composition and risk oversight

Our board
of directors currently consists of six members. Upon the closing of this offering, our amended and restated bylaws will permit our board of directors to establish by resolution the authorized number of directors and eight directors are currently
authorized.

Each of our directors is subject to election at each annual meeting of our stockholders. Our amended and restated
certificate of incorporation and amended and restated bylaws will provide that the number of our directors shall be fixed from time to time by resolution of the majority of our board of directors.

Under Delaware law, our directors may be removed for cause by the affirmative vote of the holders of a majority of our voting stock.

Our board of directors is responsible for, among other things, overseeing the conduct of our business, reviewing and, where appropriate, approving our long-term
strategic, financial and organizational goals and plans and reviewing the performance of our chief executive officer and other members of senior management. Following the end of each year, our board of directors will conduct an annual
self-evaluation, which includes a review of any areas in which the board of directors or management believes the board of directors can make a better contribution to our corporate governance, as well as a review of the committee structure and an
assessment of the board of directors compliance with corporate governance principles. In fulfilling the board of directors responsibilities, directors have full access to our management and independent advisors.

Our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. Our senior management is responsible for
assessing and managing our risks on a day-to-day basis. Our audit committee oversees and reviews with management our policies with respect to risk assessment and risk management and our significant financial risk exposures and the actions management
has taken to limit, monitor or control such exposures and our compensation committee oversees risk related to compensation policies. Both our audit and compensation committees report to the full board of directors with respect to these matters,
among others.

Director independence

In
September 2011, our board of directors undertook a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out
his responsibilities. Based upon information requested from and provided by each director concerning his background, employment, and affiliations, including family relationships, our board of directors determined that each of Messrs. Baskett,
Burkett, Gyani and Pavlov are independent directors as defined under the rules of The NASDAQ Global Market and the New York Stock Exchange, constituting a majority of independent directors of our board of directors as required by the
rules of The NASDAQ Global Market and the New York Stock Exchange.

Board committees

Our board of directors currently has an audit committee, a compensation committee and a nominating and corporate governance committee. Upon completion of the offering contemplated by this prospectus each committee
will operate under a charter that has been approved by our board of directors. Following the completion of the offering contemplated by this prospectus, copies of the charters for our audit committee, compensation committee and nominating and
corporate governance committee will be available without charge, upon request in writing to Audience, Inc., 440 Clyde Avenue, Mountain View, California 94043; Attn: Secretary, or on the investor relations portion of our website, www.audience.com.
The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

our accounting and financial reporting processes as well as the audit and integrity of our financial statements;



the qualifications and independence of our independent registered public accounting firm;



the performance of our independent registered public accounting firm; and



our compliance with disclosure controls and procedures and internal controls over financial reporting, as well as the compliance of our employees, directors and
consultants with ethical standards adopted by us.

The audit committee also has certain
responsibilities, including without limitation, the following:



selecting and hiring the independent registered public accounting firm;



supervising and evaluating the independent registered public accounting firm;



evaluating the independence of the independent registered public accounting firm;



approving audit and non-audit services and fees;



reviewing financial statements, and discussing with management and the independent registered public accounting firm, our annual audited and quarterly financial
statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding internal controls over financial reporting and disclosure controls; and



reviewing reports and communications from the independent registered public accounting firm.

Our audit committee consists of Mr. Burkett, who is the committee chairman, and Messrs. Baskett and Pavlov, each of whom is a nonemployee member of our
board of directors. Our board of directors has determined that Mr. Burkett is a financial expert as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act of 2002. Our board of directors has considered the
independence and other characteristics of each member of our audit committee. Our board of directors believes that the composition of the audit committee meets the requirements for independence under the current requirements of The NASDAQ Global
Market, the New York Stock Exchange and SEC rules and regulations. We believe that the audit committee charter and the functioning of the audit committee comply with the applicable requirements of The NASDAQ Global Market, the New York Stock
Exchange and SEC rules and regulations. Our audit committee also serves as our qualified legal compliance committee. We intend to comply with future requirements to the extent they become applicable to us.

Compensation committee. The compensation committee oversees our corporate compensation policies, plans and benefit programs and has
the responsibilities described in the Compensation discussion and analysis below.

Our compensation committee consists of Mr. Baskett,
who is the committee chairman, and Messrs. Burkett and Pavlov, each of whom is a nonemployee member of our board of directors. We believe that each member of the compensation committee meets the requirements for independence under the current
requirements of The NASDAQ Global Market and the New York Stock Exchange, is a nonemployee director as defined by Rule 16b-3 promulgated under the Securities Exchange Act of

1934, as amended (the Exchange Act) and is an outside director as defined pursuant to Section 162(m) of the Internal Revenue Code. We believe that the compensation committee charter and the
functioning of the compensation committee comply with the applicable requirements of The NASDAQ Global Market, the New York Stock Exchange and SEC rules and regulations. We intend to comply with future requirements to the extent they become
applicable to us.

The functions of this committee include, among other things:



overseeing our compensation policies, plans and benefit programs;



reviewing and approving for our executive officers other than our chief executive officer: the annual base salary, annual incentive bonus, including the specific
goals and dollar amount, equity compensation, employment agreements, severance agreements and change in control arrangements and any other benefits, compensation or arrangements;



reviewing and recommending to the independent members of our board the approval of the following for our chief executive officer: the annual salary, annual
incentive bonus, including specific goals and dollar amount, equity compensation, employment agreements, severance agreements and change in control arrangements and any other benefits, compensation or arrangements;



preparing the compensation committee report that the SEC requires to be included in our annual proxy statement; and



administrating our equity compensation plans.

Nominating and corporate governance committee. Our nominating and corporate governance committee consists of Mr. Pavlov, who is
the committee chairman and Messrs. Baskett and Gyani, each of whom is a nonemployee director of our board of directors. Our board of directors has determined that each member of our nominating and governance committee meets the requirements for
independence under the current requirements of The NASDAQ Global Market and the New York Stock Exchange. We believe that the nominating and corporate governance committee charter and the functioning of the nominating and corporate governance
committee comply with the applicable requirements of The NASDAQ Global Market and the New York Stock Exchange and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

The functions of this committee include, among other things:



assisting our board of directors in identifying prospective director nominees and recommending nominees to the board of directors for each annual meeting of
stockholders;

overseeing the evaluation of our board of directors and management; and



recommending members for each board committee to our board of directors.

Code of business conduct and ethics

We have adopted a code of business conduct and ethics that is applicable
to all of our employees, officers and directors, and we have also adopted a code of ethics for principal executives and senior financial officers.

Our 2011 Equity Incentive Plan provides that all nonemployee directors will be eligible to receive all types of awards (except for incentive stock options) under the 2011 Plan. These awards shall include annual
stock option grants and a one-time initial grant on or about the date such person becomes a nonemployee director. Nonemployee director equity awards under our 2011 Plan are discussed further in the section titled Executive
compensationEmployee benefit plans.

The following table provides information for 2011 regarding all compensation awarded to, earned by or
paid to each director for their services as a director. Mr. Santos did not receive any separate compensation as a director.

Name

Fees earned orpaid in cash

Optionawards(1)(7)

All othercompensation

Total

Forest Baskett

$



$



$



$



Marvin D. Burkett









Barry L. Cox(2)

120,000





120,000

Mohan S. Gyani(3)



95,470

(4)



95,470

George A. Pavlov









Stephen Hall(3)









Carver Mead(5)



2,345

(6)



2,345

(1)

These amounts represent grant date fair value for the respective directors option grants granted in the fiscal year computed in accordance with FASB ASC Topic 718. See
Note 10 of our financial statements for a discussion of valuation assumptions made in determining the grant date fair value of our stock options.

(2)

Pursuant to an offer letter dated October 12, 2009, during 2011 Mr. Cox received cash compensation of $120,000 for his services to us as our chairman. Mr. Cox
stepped down as our chairman in August 2011, but still serves as one of our directors.

(3)

Mr. Gyani replaced Mr. Hall on our board of directors in March 2011 and became our chairman in August 2011.

(4)

Represents the grant date fair value of an option granted on March 3, 2011 to purchase up to 1,338,750 shares of our common stock at an exercise price per share of $ 0.17.
The option vests as to 1/48 of the shares subject to the option award on each monthly anniversary of February 10, 2011, subject to Mr. Gyanis continued service through each vesting date.

(5)

Mr. Mead resigned from our board of directors in September 2011.

(6)

Represents the grant date fair value of an option granted on December 9, 2011 to purchase up to 15,000 shares of our common stock at an exercise price per share of $0.39.
The option vests as to 1/36th of the shares subject to the option award on each monthly anniversary of December 9, 2011, subject to Mr. Meads continued service through each vesting date.

(7)

The aggregate number of shares subject to stock awards and stock options outstanding at December 31, 2011 for each director set forth in the table above was as follows:

In August 2011 our board of directors approved an increase in the compensation package for our nonemployee directors beginning on January 1, 2012, based upon the recommendation of data provided by Compensia. The
amount of the annual cash retainer for nonemployee members of the board of directors was increased to $35,000, to be paid quarterly in arrears. In addition to the standard annual retainer, the board of directors approved the following annual cash
retainers for the following nonemployee members of the board of directors for service in the following positions:

Chairman of the board

$

25,000

Audit committee chair

20,000

Each audit committee member other than the chair

9,000

Compensation committee chair

12,000

Each compensation committee member other than the chair

5,000

Nominating and Governance chair

7,500

Each nominating and governance member, other than the chair

4,500

These retainers shall also be paid quarterly in arrears commencing on January 1, 2012.

Compensation committee interlocks and insider participation

No member of our compensation committee has ever been an executive officer or employee of our company, other than Mr. Cox who served on our compensation
committee prior to September 2011. None of our executive officers currently serves, or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving
as a member of our board of directors or compensation committee. Before establishing the compensation committee, our full board of directors made decisions relating to compensation of our executive officers.

We refer to these individuals collectively in this prospectus as the named executive officers.

Specifically, this compensation discussion and analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive
compensation program, and each compensation component that we provide. In addition, we explain how and why the compensation committee of our board of directors arrived at specific compensation policies and decisions involving our executive officers
during 2011.

This compensation discussion and analysis contains forward-looking statements that are based on our current plans, considerations,
expectations, and determinations regarding future compensation plans and arrangements. The actual compensation plans and arrangements that we adopt may differ materially from the currently anticipated plans and arrangements as summarized in this
compensation discussion and analysis.

Executive summary

The initial terms and conditions of employment of each of the named executive officers are set forth in written offer letters. With the exception of his own arrangement, each of these offer letters was negotiated
on our behalf by our chief executive officer, with the oversight and approval of our board of directors and/or the compensation committee.

In hiring our
executive officers, we recognized that it would be necessary to recruit candidates from outside our company with the requisite experience and skills. Accordingly, we sought to develop competitive compensation packages to attract qualified candidates
who could fill our most critical positions. At the same time, we were sensitive to the need to integrate new executive officers into our executive compensation structure, balancing both competitive and internal equity considerations.

Significant executive compensation actions

For 2011,
our board of directors took the following actions with respect to the compensation of our executive officers, including the named executive officers:



increased the base salary of Mr. Santos;



adjusted Mr. Watts salary and responsibilities as he transitioned from a managerial role serving as our chief technology officer to a role focused
solely on research as our chief scientist;

hired and negotiated a compensation package for each of Messrs. Schoenfield, Palatnik and Keane;



approved new forms of severance agreements for our executive officers;



negotiated a severance agreement with Mr. Watts; and



negotiated a separation agreement with Mr. Lau.

Significant corporate governance practices

We endeavor to maintain good governance standards in our
executive compensation practices. The following policies were in effect in 2011:



We do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, we have provided
limited perquisites, such as reimbursement of relocation expenses, to certain executive officers. Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other salaried
employees.



We have operated with the roles of chairman of the board and chief executive officer separated since October 2005. Prior to August 2011, we did not have an
independent chairman of the board.



We do not currently offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to
our executive officers, other than pursuant to our Section 401(k) plan.



The compensation advisors to the compensation committee do not provide any services to us other than executive, employee and director compensation advisory
services.

Executive compensation philosophy and objectives

We operate in a highly competitive business environment which is characterized by frequent technological advances, rapidly changing market requirements and the emergence of new market entrants. To succeed in this
environment, we must continually develop and refine new and existing products and services, devise new business models and demonstrate an ability to quickly identify and capitalize on new business opportunities. To achieve these objectives, we need
a highly talented and seasoned team of technical, sales, marketing, operations and other business professionals.

We compete with many other companies in
seeking to attract and retain a skilled management team. To meet this challenge, we have embraced a compensation philosophy of offering our executive officers competitive compensation and benefits packages that are focused on long-term value
creation and rewarding them for achieving our financial and strategic objectives.

We have developed our executive compensation program to:



provide total compensation opportunities that enable us to recruit and retain executive officers with the experience and skills to manage our growth and lead us
to the next stage of development;



establish a clear alignment between the interests of our executive officers and the interests of our stockholders;

To date, the compensation of our executive officers has generally consisted
of base salary, a cash bonus and equity compensation in the form of stock options. The key component of our executive compensation program has been equity awards for shares of our common stock. As a private company, we have emphasized the use of
equity to incent our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create value for our stockholders. In 2011 and prior years, we have used stock options as our primary equity award vehicle. Going
forward, we may use stock options, restricted stock units and other types of equity-based awards, as we deem appropriate, to offer our employees, including our executive officers, long-term equity incentives that align their interests with the
long-term interests of our stockholders.

We also offer cash compensation in the form of base salaries and a cash bonus component that we believe
appropriately recognizes and rewards our executive officers for their individual contributions to our business. Generally, cash bonuses are determined after the end of the year and reflect both a formulaic and discretionary component. When making
bonus decisions, the compensation committee considers our financial and operational performance as well as each executive officers individual performance and contributions.

Compensation-setting process

The compensation committee is responsible for overseeing our executive
compensation program, as well as determining the ongoing compensation arrangements for our executive officers other than our chief executive officer. Generally, our chief executive officer will make recommendations to the compensation committee
regarding compensation matters, except with respect to his own compensation. Following its deliberations, the compensation committee reviews and approves compensation for our executive officers and makes recommendations on chief executive officer
compensation to our board of directors for its consideration and approval.

The compensation committee is authorized to retain the services of one or
more executive compensation advisors, as it sees fit, in connection with the establishment of our compensation programs and related policies. In 2011, our board of directors and the compensation committee engaged Compensia, Inc. (Compensia), a
national compensation consulting firm, to provide executive officer, employee and nonemployee director compensation advisory services to the compensation committee. Compensia serves at the discretion of the compensation committee and did not provide
any other services to us in 2011.

In the future, we anticipate that our compensation committee will conduct an annual review of our executive
officers compensation and consider adjustments in executive compensation levels to ensure alignment with our compensation strategy and competitive market practices.

Executive compensation program components

The following describes each component of our executive
compensation program, the rationale for each and how compensation amounts are determined.

Base salary. We provide base
salary to our named executive officers and other employees to compensate them for services rendered during the fiscal year. Base salary generally will be used to

recognize the experience, skills, knowledge and responsibilities required of each named executive officer, although competitive market conditions also may play a role in setting the level of base
salary. The base salaries of our named executive officers are reviewed on an annual basis and adjustments are made to reflect performance-based factors, as well as competitive conditions. We do not apply specific formulas to determine increases.
Generally, executive officers base salaries will be adjusted effective during the first quarter of each year.

The 2011 base salaries were set by
our board of directors based on the recommendations of our chief executive officer, other than with respect to his own salary, and were set to reflect our status as a private company. Based on the growth of revenue, achievement of profitability and
our overall performance, the base salary of Mr. Santos was increased in 2011 by 18%. Our board of directors determined that the new base salary rate was in the range of private companies based on the boards collective experience regarding
the industry in which we compete for talent. For a summary of the base salaries paid in 2011 see, 2011 summary compensation table, below.

Cash bonuses. We use annual cash bonuses to motivate our executive officers to achieve our short-term financial and strategic objectives while making progress towards our longer-term
growth and other goals. Each year, we adopt a cash bonus plan to align the financial incentives of our executive officers with our short-term operating plan and long-term strategic objectives and the interests of our stockholders.

The compensation committee approves the design, structure and performance measures, as well as the relative weighting of each measure, under the cash bonus plan.
Generally, the bonuses for our executive officers are linked to the achievement of our annual financial and operational objectives and individual performance objectives. These bonus opportunities allow us to make a significant portion of each
executive officers total cash compensation performance-based and at risk, consistent with our compensation philosophy.

Target bonus
opportunities. For 2011, our annual cash incentive award opportunities were designed to reward our named executive officers (other than Mr. Watts) based on our performance and, in the discretion of our chief executive
officer, the individual named executive officers contribution to that performance. Our compensation committee established a target award opportunity for each named executive officer. Corporate objectives are the primary factor for the
calculation of a bonus. In his discretion, our chief executive officer may increase or decrease a named executive officers bonus (other than the chief executive officers own bonus) based on his subjective determination of the named
executive officers individual achievement during the year. The 2011 target award opportunities for our named executive officers were as follows:

Named executive officer

Target bonusopportunity(as a percentageof base salary)

Peter B. Santos

50.0

%

Kevin S. Palatnik

30.0

Andrew J. Keane

30.0

Robert H. Schoenfield

32.6

Thomas Spade(1)

50.0

James L. Lau

30.0

Lloyd Watts

25.0

(1)

Mr. Spades target bonus opportunity is set forth in his sales commission plan.

Our compensation committee determined that our named executive officers should be primarily incentivized based upon
achievement of corporate goals because these officers are primarily responsible for achievement of corporate-level milestones. For 2011, the process for determination of the bonuses for Mr. Watts and Mr. Lau differed from the other named
executive officers. With respect to Mr. Watts, in light of his transition from a managerial role serving as our chief technology officer to a more research focused role as our chief scientist, our compensation committee determined that
Mr. Watts should be primarily incentivized based upon the progress of his research, as determined in the sole discretion of our chief executive officer based upon our chief executive officers subjective determination of the progress of
Mr. Watts research. Mr. Laus employment with us terminated in November 2011 following a certain period in which he assisted in the transition of his duties to our chief financial officer. Generally, a named executive officer
must remain employed with us through the end of the year to be eligible for a bonus. In recognition of a successful transition, our compensation committee decided to pay Mr. Lau 75% of his target bonus as part of his separation agreement.

Executive bonus plan. In January 2011, our compensation committee approved the general framework of a 2011 executive bonus
plan. Under the bonus plan, our compensation committee established corporate objectives in the following three categories: (i) financial measures, (ii) customer focus and (iii) product focus. With respect to financial measures, our
compensation committee set 2011 objectives of achieving revenue in excess of $90 million and attaining gross margin and operating margin in excess of our annual operating plan. With respect to customer focus, our compensation committee set 2011
objectives to attain certain design wins for each of our handset, computer and media tablet customers. With respect to product focus, our compensation committee set objectives relating to execution of product roadmaps and product design wins. With
respect to any adjustments arising from individual performance under the bonus plan, our compensation committee tasked our chief executive officer with the responsibility of establishing and evaluating these objectives (other than his own) as he is
closer to the day-to-day operations of our business and in a better position to assess the key performance requirements for each named executive officer. Any individual performance adjustments reflect our chief executive officers subjective
determination of the role of each named executive officer in contributing to our achievement of the corporate-level goals.

Bonus
decisions. As of the date of this prospectus, our compensation committee had not yet reviewed our performance and determined bonus payments for the named executive officers for 2011. The following table shows the 2011
bonus targets for each of our named executive officers.

Named executive officer

Target bonusopportunity

Actual bonusaward

Peter B. Santos

$

175,000

$

Kevin S. Palatnik

35,114

Andrew J. Keane

6,676

Robert H. Schoenfield

62,438

Thomas Spade(1)

110,000

James L. Lau

53,300

Lloyd Watts

59,900

(1)

Mr. Spades target bonus opportunity is set forth in his sales commission plan.

Discretionary cash bonuses. No discretionary cash bonuses were paid in 2011 other than to Mr. Santos, in connection with his annual review, Mr. Palatnik, in connection with his
offer letter, and Mr. Watts, in connection with his transition to Chief Scientist.

Equity compensation. We use equity awards to incent and reward our executive officers
for long-term corporate performance based on the value of our common stock and, thereby, to align the interests of our executive officers with those of our stockholders.

Historically, the size and form of the initial equity awards for our executive officers have been established through arms-length negotiation at the time the individual executive was hired. In making these awards,
we considered, among other things, the prospective role and responsibility of the individual executive, competitive factors, the amount of equity-based compensation held by the executive officer at his or her former employer, the cash compensation
received by the executive officer and the need to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. In addition, we have periodically granted equity awards to our executive officers to ensure that
their overall equity position was consistent with our compensation objectives.

In 2011 we did not grant equity awards to any of our existing named
executive officers, however, our board of directors approved equity awards to Messrs. Palatnik, Keane and Schoenfield in connection with their employment as our executive officers as follows:

Named executive officer

Stock option grant(number of shares)

Kevin S. Palatnik(1)

5,705,540

Andrew Keane(2)

4,265,333

Robert Schoenfield(3)

4,300,000

(1)

Mr. Palatnik joined us in August 2011.

(2)

Mr. Keane joined us in November 2011.

(3)

Mr. Schoenfield joined us in March 2011.

Retirement and
other benefits. We have established a tax-qualified Section 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Currently, we do not
match contributions made by participants in the plan. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code so that contributions by participants to the plan, and income earned on plan contributions, are not
taxable to participants until withdrawn from the plan.

Additional benefits received by our executive officers include medical, dental and vision
benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance and basic life insurance coverage. These benefits are provided to our executive officers on
the same general terms as to all of our fulltime U.S. employees.

We design our employee benefits programs to be affordable and competitive in relation
to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.

We do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, we have provided limited
perquisites, such as reimbursement of relocation expenses, to certain executive officers.

In the future, we may provide perquisites or other personal
benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment, motivation or
retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee.

In December 2011, we entered into change of control and severance agreements (severance agreements) with our named executive officers (other than persons who are no longer our executive officers), which require us
to make specific payments and benefits in connection with terminations of their employment under certain circumstances. These severance agreements superseded any other agreement or arrangement relating to severance benefits with these executive
officers. For Mr. Watts, we entered into a separate agreement which is not of the same general form as the other named executive officers severance agreements. Mr. Laus separation agreement is discussed below in Change
of control severance agreements and potential payments upon termination or change of controlSeverance benefits received by James L. Lau.

For a summary of the material terms and conditions of severance terms for our named executive officers, see Potential payments upon termination or change of control as of December 31, 2011.

Tax and accounting considerations

Deductibility of executive compensation. Generally, Section 162(m) of the Internal Revenue Code disallows a tax deduction to any
publicly held corporation for any remuneration in excess of $1 million paid in any taxable year to its chief executive officer and each of its three other highest paid named executive officers, other than its chief financial officer.
Remuneration in excess of $1 million may be deducted if, among other things, it qualifies as performance based compensation within the meaning of the Internal Revenue Code. In this regard, the compensation income realized upon the exercise of
stock options granted under a stockholder-approved stock option plan generally will be deductible so long as the options are granted by a committee whose members are nonemployee directors and certain other conditions are satisfied.

As we are not currently publicly traded, the compensation committee has not previously taken the deductibility limit imposed by Section 162(m) into
consideration in setting compensation for our executive officers. We expect that, where reasonably practicable, we will seek to qualify the variable compensation paid to our executive officers for the performance-based compensation exemption from
the deductibility limit. As such, in approving the amount and form of compensation for our executive officers in the future, we will consider all elements of the cost to us of providing such compensation, including the potential impact of
Section 162(m). The compensation committee may, in its judgment, authorize compensation payments that do not comply with an exemption from the deductibility limit when it believes that such payments are appropriate to attract and retain
executive talent.

Taxation of parachute payments. Sections 280G and 4999 of the Internal Revenue Code
provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control that exceeds certain
prescribed limits, and that we, or a successor, may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer with a gross-up or other reimbursement payment for any tax liability that he may owe as a
result of the application of Sections 280G or 4999 during 2011 and we have not agreed and are not otherwise obligated to provide any named executive officer with such a gross-up or other reimbursement.

date fair value of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any
value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in
exchange for the option or other award.

2011 summary compensation table

The following table presents compensation information for 2011 paid to or earned by our chief executive officer, our chief financial officer, our former chief financial officer and each of our four other most
highly compensated executive officers whose aggregate salary and bonus was more than $100,000. We refer to these executive officers as our named executive officers elsewhere in this prospectus.